Microsoft 365 Licensing: Are You Paying for Seats You Don't Use?

Microsoft 365 has become one of those business expenses that is incredibly easy to stop questioning.

A new employee joins.

You buy another licence.

Someone needs an extra Microsoft service.

Another licence appears.

An employee leaves.

Their account remains “for now, just in case.”

Six months later, you're still paying for it.

Multiply that across several years of staff changes, contractors, shared mailboxes and different Microsoft 365 plans, and your monthly Microsoft bill can become surprisingly bloated.

The problem isn't necessarily Microsoft's pricing.

It's often licence creep.

And for many SMEs, a Microsoft 365 licensing review can reveal money being spent every single month on subscriptions that aren't being properly used.

The Licence You Forgot About

Imagine a 30-person company.

Its accounts department sees charges for 37 Microsoft 365 licences.

Nobody immediately thinks that's strange.

Perhaps there are directors.

Maybe a couple of contractors.

There are probably some shared accounts.

Except when someone actually investigates, they discover:

• Two licences belong to employees who left months ago
• One belongs to a contractor who finished last year
• Two are assigned to mailboxes that could potentially be configured as shared mailboxes
• One employee has a more expensive licence than their role requires
• Another licence isn't assigned to anyone at all

Suddenly, the company isn't really paying for 30 Microsoft users.

It's paying for 37.

That difference repeats every month.

This is why Microsoft 365 licensing should be managed as an ongoing IT process rather than something you only examine when the invoice looks unusually large.

Removing a User Isn't Necessarily the Same as Stopping the Cost

This catches businesses out.

When an employee leaves, removing or deleting their Microsoft 365 account doesn't automatically mean you've reduced the number of licences you're paying Microsoft for.

Microsoft confirms that deleting a user makes their licence available to assign elsewhere, but reducing the quantity you're actually paying for can require a separate subscription change. Depending on your billing arrangement and commitment term, you may also be unable to reduce the paid quantity until an appropriate cancellation or renewal window.

In other words:

Unused licence available: 1

doesn't necessarily mean:

Licence removed from next invoice: 1

That's an important distinction.

You can have perfectly tidy user accounts while still carrying unnecessary paid capacity.

Start With the Leavers

One of the simplest places to find wasted Microsoft 365 spending is your former employee list.

Every business should have a proper joiner, mover and leaver process.

When someone leaves, you need to decide what happens to:

Their Microsoft account.

Email.

OneDrive files.

Teams access.

Company data.

Devices.

Security credentials.

And their Microsoft 365 licence.

Simply leaving the account running “because we might need their emails” is usually poor practice.

There are better ways to preserve necessary business information without keeping an active employee account around indefinitely.

Microsoft allows administrators to give another user access to a former employee's email and OneDrive data as part of the offboarding process.

The key is to have a deliberate process rather than allowing old accounts to accumulate.

Are You Licensing Shared Mailboxes?

This is another common place to look.

Addresses such as:

accounts@company.co.uk

sales@company.co.uk

info@company.co.uk

support@company.co.uk

are often used by several people rather than one specific employee.

These can often be configured as Microsoft 365 shared mailboxes rather than conventional licensed user mailboxes.

Microsoft currently allows a shared mailbox to store up to 50GB without its own licence in normal circumstances, although additional licensing can be required for larger mailboxes, archiving, litigation hold and certain advanced compliance or security features.

That distinction can matter.

If your organisation has ten generic departmental email addresses and someone has simply bought a full Microsoft 365 user licence for every one of them, there could be an opportunity to tidy up both the environment and the bill.

But don't simply start removing licences.

Shared mailbox licensing has exceptions, and changing a user mailbox to a shared mailbox needs to be done correctly. Microsoft specifically advises converting the mailbox before removing its licence, where appropriate.

This is exactly where good IT management earns its keep.

Are People on the Wrong Microsoft 365 Plan?

Unused seats aren't the only source of unnecessary cost.

You can also be paying too much for used seats.

Microsoft offers numerous business and enterprise subscriptions with different combinations of:

• Desktop Office applications
• Exchange Online
• OneDrive
• SharePoint
• Teams functionality
• Device management
• Identity protection
• Security services
• Compliance capabilities

Giving everybody the cheapest licence isn't necessarily sensible.

But neither is giving everyone the most expensive one because “it's easier”.

Your finance director, receptionist, field worker and IT administrator may have very different requirements.

The right question isn't:

“Which Microsoft 365 plan do we use?”

It is:

“Which capabilities does each group of users genuinely need?”

Don't Optimise Security Out of the Business

There is an important warning here.

A licensing audit should not become a race to downgrade everybody.

Microsoft 365 licensing isn't just about Word, Outlook and Excel anymore.

Higher-tier subscriptions can include important identity, security and device-management capabilities.

For example, some businesses deliberately standardise around Microsoft 365 Business Premium because they want the additional security and management tools included with that subscription.

Downgrading a user because they “only use email and Excel” may make the spreadsheet look better while quietly removing security capabilities the business relies on.

Saving a few pounds per month is not particularly impressive if it creates a substantially larger cyber-security problem.

So optimise licences based on business requirements and risk, not simply the cheapest available SKU.

What About Unassigned Licences?

Here's another easy one.

You purchased 35 licences.

You currently have 31 assigned.

Great. You have four spare licences ready for growth.

Except your business isn't currently recruiting.

Those four licences remain unused for most of the year.

Are they genuinely required?

Microsoft provides administrators with tools to view licence assignments and remove licences from users, while subscription quantities can also be reduced where the subscription terms allow it.

Keeping one spare licence might be convenient.

Keeping twelve “just in case” isn't necessarily good financial management.

Self-Service Purchases Can Complicate Things Too

Microsoft also supports certain self-service purchases and trials where individual users can acquire subscriptions themselves.

That can be useful, but it can also make centralised licence management harder if nobody is keeping track of what has been purchased.

Microsoft provides administrators with visibility and management options for self-service subscriptions through the Microsoft 365 admin centre.

Businesses should therefore periodically ask:

What are we buying centrally?

What have users purchased themselves?

Are any trials still running?

Do we have overlapping tools providing the same capability?

That's not purely an IT question.

It's also a cost-control question.

The Buff IT Guy's Microsoft 365 Workout

This is probably where the Buff IT Guy makes an appearance.

Imagine your Microsoft tenant has spent five years accumulating licences, old users, unused services and mystery accounts.

The Buff IT Guy doesn't solve that by flexing at the Microsoft 365 admin centre until the unnecessary licences disappear.

Although we're sure he'd try.

Instead, your Microsoft environment needs a proper workout.

First, identify every licence being paid for.

Then identify who or what it is assigned to.

Remove the dead weight.

Check the remaining users are on appropriate plans.

Make sure shared mailboxes are configured properly.

Review security requirements.

Build a proper employee offboarding process.

Then repeat the exercise regularly.

It's essentially strength and conditioning for Microsoft 365.

Less unnecessary weight. More useful capability.

A Microsoft 365 Licence Audit Should Answer These Questions

A good licensing review should be able to tell you:

How many Microsoft 365 licences are we paying for?

Not merely how many are currently assigned.

How many employees actually need them?

Compare licences against your current HR or staff records.

Do former employees still have licences?

If they do, establish why.

Are there unassigned licences?

And are they genuinely needed?

Are shared mailboxes consuming full licences unnecessarily?

Check the configuration and requirements before making changes.

Are users on the right plans?

Some may need more capability. Others may need less.

Are we paying for duplicate services?

For example, are you buying capabilities from Microsoft and then purchasing separate products that perform the same function?

Sometimes this is entirely justified.

Sometimes nobody realised the Microsoft licence already included something similar.

When do our licence commitments renew?

This matters because discovering ten unnecessary licences immediately after committing to another year isn't ideal.

A Small Saving Becomes a Big Number

Licence optimisation sometimes gets ignored because each individual saving appears relatively small.

Suppose you find five unnecessary licences costing £15 per month each.

That's only:

£75 per month.

Hardly transformational.

Except that's:

£900 per year.

If you identify £200 of unnecessary monthly licensing across Microsoft 365, security products, backup, email filtering and other cloud services, you're suddenly talking about:

£2,400 every year.

And businesses often keep the same unnecessary licences for years.

Recurring cloud waste is particularly dangerous because it doesn't feel like a large purchase.

There is no £2,400 invoice landing dramatically on the managing director's desk.

Instead, the money quietly disappears a little at a time.

Licence Management Is Part of Good IT Management

The best time to review Microsoft licensing isn't once every five years when someone from finance asks why the bill has increased.

It should form part of normal IT management.

When an employee joins, assign what they need.

When their role changes, reconsider their access.

When they leave, remove access and deal with their licence correctly.

When Microsoft changes its products or your business adopts new technology, review whether your existing licensing still makes sense.

And before renewals, check your quantities.

This sounds obvious.

But like many IT tasks, it only happens consistently when somebody owns the process.

How Hamilton Group Can Help

Hamilton Group can help businesses take control of their Microsoft 365 environment rather than simply continuing to pay whatever appears on the invoice each month.

We can help review:

• Existing Microsoft 365 licences
• Active and inactive users
• Unassigned subscriptions
• Employee joiner and leaver processes
• Shared mailbox configuration
• Microsoft 365 security
• Multi-factor authentication
• Microsoft Entra ID
• Microsoft Intune and device management
• Microsoft Defender services
• Email security
• Microsoft 365 administration
• Licence renewal planning

The objective isn't simply to reduce your licence bill.

It's to make sure you are paying for the services you need, using the capabilities you've bought and protecting the business properly.

Sometimes that means removing licences.

Sometimes it means changing licences.

And sometimes it means discovering that the business has been paying for a powerful security capability for months without anybody actually configuring it.

That's where the Buff IT Guy comes in.

You don't want Microsoft 365 that's bloated with unnecessary subscriptions.

You want it lean, secure and doing some actual work for the business.

Think You're Paying for Microsoft 365 Seats You Don't Use?

If nobody has reviewed your Microsoft 365 licensing recently, there's a good chance it's worth looking.

Hamilton Group can review your Microsoft 365 setup, identify opportunities to reduce waste and make sure cost savings don't come at the expense of security.

Call Hamilton Group on 0330 043 0069

Email: hello@hgmssp.com

Visit: hgmssp.com

We'll help you understand what you're paying for, what you're actually using and whether your Microsoft 365 environment could be working harder for your business.