Microsoft 365 licensing can feel like an elaborate puzzle designed to make you overspend. Cut through the noise: choose the licence that matches the people and risks you actually have, not the one that sounds safest at first glance.
How I think about Microsoft 365 licences
Pick licences based on four simple things: the number of users, what employees actually do day-to-day, the level of security and compliance required, and the budget you have for licences. The most common trap I see is giving high-tier licences to people who just need email and Teams. That wastes money and creates management headaches.
Scenario-driven breakdown
Microsoft 365 Business Premium — the best allrounder for SMEs
What it includes: full Office apps, Exchange email, Teams, SharePoint, OneDrive, Intune for device management, Defender for Business, DLP and conditional access.
When to use it: small and medium businesses (up to 300 users) that want enterprise-grade protection without the enterprise price tag. It covers productivity and strong built-in security in one licence.
Real-world example: a 200-user law firm switched from E5 to Business Premium and saved about £66,000 per year while retaining the email, Teams and robust security they needed.
“It just sounds more compliant.”
Often that is the exact argument for an unnecessary upgrade. If compliance needs are reasonable and within Business Premium capabilities, stop there and save money.
Microsoft 365 F3 — for frontline and shift workers
What it includes: web and mobile Office apps, Teams, Outlook, SharePoint, OneDrive, a small mailbox (about 2GB), basic Intune device policies, MFA and conditional access support.
When to use it: people who do not sit at a desk with a desktop PC for most of the day — think warehouse operatives, retail staff, factory floor workers and shift teams.
Why it matters: F3 gives secure, lightweight access while removing full desktop features those users will never use. Moving frontline staff from Business Premium to F3 typically saves around £8–10 per user per month. Multiply that across hundreds of users and the savings are substantial.
Microsoft 365 E3 — the enterprise baseline (but watch the security gap)
What it includes: the same core productivity apps and services as Business Premium, plus enterprise features and no 300-user cap.
The catch: E3 drops Defender for Business. That means you pay more for an enterprise licence but lose the built-in endpoint protection that Business Premium provides.
How to fix it: add Defender for Endpoint Plan 1 and Defender for Office 365 Plan 1 to get roughly the same protection level as Business Premium. In practice that takes E3 from about £31 per user per month to roughly £35 per user per month. That works out to around £420 per user per year — meaning E3 with the equivalent security can be roughly £150–£160 more per user annually than Business Premium.
When to use it: organisations that have grown beyond 300 users and need enterprise features, but do not require the full E5 security and compliance stack.
Microsoft 365 E5 — everything on and dialled up
What it includes: E3 plus the full advanced security and compliance stack — Defender for Endpoint Plan 2, Defender for Office 365 Plan 2, Defender for Cloud Apps (full), Microsoft Purview with advanced eDiscovery, data classification and insider risk, Teams Phone and Power BI Pro.
When to use it: organisations with high compliance, audit, and risk requirements — large finance firms, regulated healthcare providers, legal organisations with heavy eDiscovery needs or anyone whose compliance lead insists on end-to-end visibility. If the word “compliance” appears in someone’s job title, they will probably ask for E5.
Cost note: E5 is a premium product — typically about £52 per user per month in the scenarios I see. You pay significantly more, but you get telemetry, automated investigations, advanced detection and response, continuous monitoring and powerful compliance tools.
Quick decision guide
- Business Premium: small to midsize organisations up to 300 users that want full Office + strong built-in protection. Default choice for most SMEs.
- F3: frontline, shift or kiosk users who need mobile/web access and basic security. Great for large headcounts where cost matters.
- E3: organisations >300 users needing enterprise features. Add Defender for Endpoint and Defender for Office 365 to restore parity with Business Premium security.
- E5: high compliance and security requirements. Use when you need advanced detection, response, cloud app controls and comprehensive compliance tooling.
Checklist before you change licences
- Count users and split by role: desk workers, frontline workers, contractors.
- List must-have security and compliance features: eDiscovery, data classification, automated investigation, Teams phone, Power BI Pro.
- Calculate licence costs per user for the whole stack (don’t forget required add-ons).
- Consider migration and management overheads — fewer licence types usually means simpler administration.
- Test with a pilot group before rolling out mass licence changes.
| Licence | Best For | Key Features | User Limit | Security Notes | Typical Cost (per user/month) |
|---|---|---|---|---|---|
| Business Premium | SMEs | Full Office apps, Teams, Exchange, SharePoint, OneDrive, Intune, Defender for Business, DLP, Conditional Access | Up to 300 | Built-in endpoint protection included | ~£31 |
| F3 | Frontline / shift workers | Web & mobile Office apps, Teams, Outlook, SharePoint, OneDrive, basic Intune policies, MFA, Conditional Access | No strict cap | Basic security | ~£8–10 savings vs Business Premium per user |
| E3 | Larger organisations >300 users | Core productivity apps + enterprise features | Unlimited | Requires Defender add-ons to match Business Premium security | ~£31 + £4 (for Defender add-ons) = ~£35 |
| E5 | High compliance / security needs | E3 + advanced security & compliance, Cloud App Security, Teams Phone, Power BI Pro, advanced eDiscovery, data classification, insider risk management | Unlimited | Full enterprise security & compliance suite | ~£52 |
Final words
Microsoft 365 licensing doesn’t have to be painful. Match licence capabilities to user needs and compliance requirements, not to the scariest-sounding job title in the building. Business Premium is often the right balance for SMEs; F3 cuts costs for frontline teams; E3 is the enterprise step-up with a security add-on caveat; and E5 is the full security and compliance toolbox for those who truly need it.
Choose deliberately. You’ll save money, reduce complexity and stop accidental licences ending up on the coffee machine.
Salman Tariq
SalmanTechBlogs 
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