Microsoft 365 monthly or annual subscription: what to choose
Published:
Short answer: Microsoft offers two commitments. The annual commitment has a lower price per user, but you keep the licences for 12 months. The month-to-month option lets you add or reduce licences, or cancel, whenever you want, at a higher list price per user. What changes the price is the length of the commitment, not whether you pay monthly or once a year.
Last checked: 30 October 2026.
What is the difference between an annual commitment and month-to-month?
With an annual commitment you lock a number of licences for a year. You can add more along the way, but you cannot drop below the committed number until it ends. In return, the price per user is lower. You can choose to pay either once a year or in monthly instalments — the price is the same.
With the month-to-month option you lock nothing: you scale licences up or down each month and stop whenever you want. That flexibility has a cost — the list price per user is noticeably higher than the annual one.
When does month-to-month pay off?
Month-to-month pays off when your headcount changes: seasonal staff, external collaborators for a project, a team you are trialling before you commit. You pay more per user, but you do not pay for licences you are not using when the team shrinks.
Can I combine the two?
Yes, and that is usually the right move. You put an annual commitment on the stable core of the company (the people you know will be here all year) and month-to-month on seasonal or uncertain roles. That way you get the low price where you can commit and flexibility where you need it. Our own practical advice: start with annual only for the people who are clearly permanent.
At ITHACA we set up the mix for you and remind you before every renewal, so you do not lock in licences you no longer need.
Frequently asked questions
Do I pay once a year or every month?
With both commitments you can choose how to pay. On the annual commitment you pay either the whole year up front or in monthly instalments, at the same (lower) price. The payment method does not change the price — the length of the commitment does.
Can I reduce licences mid-year?
With an annual commitment, not below the committed number until it ends; you can, however, add more. With month-to-month you can reduce whenever you want. That is why we put uncertain roles on month-to-month.