Microsoft 365 license types compared in one license matrix. What each plan costs and who it fits.

E5 costs exactly $21 a user a month more than E3, at both the old and the July 2026 list. Test every add on stack and Copilot seat against that gap, and place users from 90 days of usage data.

What are the Microsoft 365 license types and what does each cost?

Microsoft 365 comes in three families. Frontline plans (F1 and F3) cover shift and task workers, Business plans cover organizations under 300 users, and Enterprise plans (E3, E5 and the new E7) cover everyone else. Copilot is a $30.00 add on that sits on top of almost any of them.

Every dollar figure here is published list, before discount. Microsoft publishes no EA or CSP discount levels, so benchmark your own tier; a single percentage quoted in a sales deck tells you little. No Teams versions of the suites list lower, for example E3 at $30.45 and E5 at $51.45, with Teams licensed separately.

What changed on July 1, 2026?

E3 and E5 each rose $3, to $39.00 and $60.00, so the gap between them stayed at $21. F1 rose 33 percent and F3 25 percent. Business Basic moved to $7.00 and Standard to $14.00, while Premium held at $22.00.

An Enterprise Agreement normally holds its contracted unit prices for the term, so many buyers meet the new list only at renewal. How to handle it then is covered in negotiating the 2026 price increase.

How much more does E5 cost than E3, and what does the extra buy?

E5 costs exactly $21.00 more than E3 per user per month, or $252 a year. That was true at the old list ($57 minus $36) and is true at the new one ($60 minus $39). The premium buys Defender for Endpoint P2, Defender for Office 365 P2, advanced Purview governance, Teams Phone and Power BI Pro.

Each of those is also sold as an add on to E3. For any group of users, price the add ons that role needs and set the total against $21. The persona by persona version is in our E3 versus E5 versus F3 decision guide.

Does E3 plus two add ons cost more than E5?

Yes, every time at current list. One add on keeps E3 cheaper than E5; any two of the four main add ons cost $1 to $5 a month more than the E5 premium.

The Defender Suite and Purview Suite are the security and compliance halves of E5, and both require an E3 base. An earlier version of this page, working from older add on prices, counted four of the six pairs above the line; at current list all six are.

Two pairs clear it by only $1, so rerun the table with your own discounted prices before you decide. Buy all four and you pay $48 on top of E3, with four extra SKUs to count and renew.

When does one add on beat E5?

• Staff who need a phone number in Teams. E3 plus Teams Phone Standard is $49, $11 under E5.
• Users whose only gap is endpoint and email protection. E3 plus the Defender Suite is $51, $9 under E5.
• Analysts who publish and share reports. E3 plus Power BI Pro is $53, $7 under E5.

Why we reject the three add on rule of thumb

A common rule says keep users on E3 until they need three E5 capabilities. We think it is wrong, because the pair table puts the break point at two. In our reviews, security add ons bought one at a time to avoid E5 had already passed the E5 price. Upgrade when a role needs a second add on.

Run the test in reverse too. An E5 seat whose user never touches an E5 only service is $252 a year spent on nothing. When Defender for Endpoint P2 alone justifies the step is covered in our Microsoft security licensing guide.

Is Microsoft 365 Business Premium a cheaper E3?

Only below 300 users. Business Premium gives E3 class identity and device control for $22.00 against $39.00 for E3, but every Business plan has a hard 300 user cap, and Premium carries no Windows Enterprise E3 upgrade rights. The full comparison is in the Business versus Enterprise plans guide.

What happens as you approach 300 users?

The cap applies to each Business plan, and a tenant can hold Business and Enterprise plans side by side. A growing company can move its heavier users to E3 or E5 first. Plan it a year ahead, because Windows rights, the Office apps edition and the security tooling all change with the family.

When do Microsoft 365 F1 and F3 make sense?

F plans fit shift, retail and shared device staff who need identity, Teams and light apps without desktop Office. At the old list F3 cost $8.00 against $36.00 for E3, 22 percent of the price. After discount it typically lands at 30 to 40 percent of the E3 rate, because Microsoft discounts E3 harder than F3.

On those old figures an F3 seat cost 60 to 78 percent less than E3, depending on discount. At the new list F3 is $10.00 against $39.00, about 26 percent of the price, or 74 percent less. F1, now $3.00 after years at $2.25, covers task roles that need identity and Teams without a mailbox.

Why frontline savings need a written placement rule

The saving arrives only when a policy sends shift and shared device roles to an F plan at hire. Without one, new starters get the default license, usually E3, and keep it. The Microsoft 365 licensing guide sets out the quarterly placement routine that enforces the rule. Plan detail is in F3 versus E3 and F1 versus F3.

How much can correct plan placement save?

On a hypothetical 6,000 user company, three corrections are worth $479,400 a year at current list. It holds 2,000 E5 seats, 3,000 E3 seats for office staff and 1,000 E3 seats used by shift workers, and 150 of the office staff carry both the Defender and Purview suites.

The 500 seats are 25 percent of the E5 base, inside the range of unused E5 we found in our reviews. The third row is small, but it removes two add on SKUs from every count. At the old list the F3 move alone was worth $336,000 a year, at $28 a seat a month.

How does Copilot change the license choice?

Copilot at $30.00 stacks on a qualifying base plan. At the old list Copilot on E3 was a $66 seat, $9 more than a full E5 seat without Copilot, and Copilot on E5 was $87. At current list those seats cost $69 and $90, and the $9 gap to E5 is unchanged.

E3, E5, the Business plans, F1 and F3 all qualify, so Copilot does not force an upgrade. E7 at $99.00 bundles E5, Copilot, Agent 365 and the Entra Suite, $9 more than E5 plus Copilot. The Entra Suite alone lists at $12, so E7 pays only if you want it or Agent 365; see our E7 guide.

Who should get a Copilot seat?

Choose the Copilot population from the same usage export as the tier review. Users who rarely open Word, Excel, Outlook or Teams will not use Copilot inside them. Commercial terms are in Copilot pricing in 2026.

Does paying monthly cost more for Microsoft 365?

Yes. Since April 2025, annual term subscriptions billed monthly cost 5 percent more than the same subscriptions paid annually. At the old list that turned E3 at $36 into $37.80, or $216,000 a year on 10,000 seats. At $39.00 it becomes $40.95, or $234,000 a year.

The uplift applies to purchases through CSP, the Microsoft Customer Agreement for enterprise and online buying. Pay annually, or negotiate the uplift away with your partner or Microsoft as part of the deal. Channel trade offs are in CSP versus Enterprise Agreement.

How do you check which license each user actually needs?

Start from per user activity in the Microsoft 365 admin center usage reports. The license count only repeats what Microsoft already knows you bought. Pull 90 days of activity per user, map each user to the SKU they hold, and compare use with what that SKU adds.

1. Show real names. Under Settings, Org settings, Services, Reports, turn off concealed user names, or exports will show anonymized IDs.
2. Export activity. In Reports, Usage, set 90 days and export active users, email activity, Microsoft 365 Apps usage and Teams user activity.
3. Export assignments. List each user's SKU from the Licenses page or with Get-MgUserLicenseDetail in Microsoft Graph PowerShell.
4. Check the E5 only signals. Teams Phone calls in the Teams admin center PSTN usage report, publishing and sharing in the Power BI activity log, devices onboarded in the Defender portal device inventory, and eDiscovery or insider risk cases in the Purview portal.

What have we seen in Microsoft 365 plan reviews in 2024 and 2025?

Across roughly 35 to 45 Microsoft 365 plan reviews I led in 2024 and 2025, the 90 day usage export showed the same three problems, none of them visible in the license count.

• Unused E5. 20 to 30 percent of E5 seats had triggered no E5 only service inside the 90 day window, each paying $252 a year of premium.
• Frontline staff on E3. Shared device and shift roles sat on E3 because no one had written the rule that sends them to F3.
• Add on stacks past E5. Security add ons bought for E3 users to avoid E5 had already passed the E5 price.

The last item we check in every review is the monthly billing uplift. It is easy to miss, because it is folded into the unit price and never gets its own invoice line.

The license count tells Microsoft what you bought. The 90 day usage export tells you what to buy next.

What will the Microsoft account team say, and how should you answer?

Expect the account team to argue for E5 across the board with Copilot on top. Answer each line with your own usage data.

Typical lines and replies

• "E5 gives you everything for only $21 more." Agree for roles that need two or more E5 capabilities. For the rest, show the seats with no E5 activity.
• "Copilot works best on E5." Copilot qualifies on E3 and even F3. Buy E5 for its own security and compliance value.
• "You cannot reduce E5 quantities until renewal." Read your enrollment before you accept this. Reductions are usually limited to an anniversary or the renewal itself, so finish the placement review well before the next of those dates.

Contract terms to ask for

• A unit price for every SKU. Discounts on E3, E5 and each add on differ, and you need each one to rerun the $21 test.
• A written step down right at each anniversary. The right to move an agreed number of users from E5 to E3, or E3 to F3, without waiting for renewal or breaching your enterprise wide minimum.
• Billing terms in writing. Annual billing, or monthly billing with no 5 percent uplift.
• Price holds on add ons. Teams Phone Standard rose from $8 to $10 and Power BI Pro from $10 to $14 in April 2025.

These are requests, and Microsoft grants them unevenly. Each one you secure is usually worth more than an extra point of headline discount, because the discount applies to whatever mix you bring.

What to do next

1. Pull the 90 day active user export. Turn off concealed names and map every seat to its SKU string ID.
2. Test every E5 seat for E5 only activity. Move the seats with none to E3 at the next point your contract allows.
3. Price every add on stack against the $21 line. Any user carrying two of the four main add ons belongs on E5.
4. Write the F plan placement rule. Send shift and shared device roles to F3 or F1 at hire, and check it each quarter.
5. Check the billing cadence. Find annual subscriptions billed monthly and remove the 5 percent uplift.
6. Price Copilot into each tier decision. Take the corrected mix into the renewal. The Microsoft 365 license optimizer runs a first pass, and our Microsoft practice can run the full review with you.

Frequently asked questions