Manage Copilot licenses and pay-as-you-go billing

  • 7 minutes

Managing licenses and billing in Microsoft 365 Copilot is one of the most critical responsibilities for IT administrators. Without proper licensing, users can’t access Copilot features, and without careful billing management, costs can quickly escalate. Admins are the gatekeepers for ensuring that resources are allocated properly, costs remain predictable, and business users have uninterrupted access to the tools they need. This training unit provides the technical foundation for effectively handling these tasks.

Licenses and billing are closely tied together. Assigning licenses isn’t just about activating features for users; it also directly impacts your organization’s subscription costs. Microsoft offers both standard add-on licensing and flexible pay-as-you-go billing models. Each option has its strengths and trade-offs. Understanding how these options work in practice, and how they’re reflected in your dashboards, alerts, and invoices, is essential for administrators to avoid billing surprises and service disruptions.

Finally, administrators must be comfortable with the tools and dashboards Microsoft provides. The Microsoft 365 admin center, Azure portal, and billing dashboards present a wide range of data, but it can be overwhelming for new admins. Alerts, cost reports, and usage data are all designed to help you make informed decisions. By working through this unit, you should become familiar with the core administrative steps, where to find key settings, and how to interpret the billing signals that help keep your Copilot deployment running smoothly.

How to assign Microsoft 365 Copilot licenses to users

Assigning licenses is the first step to enabling Copilot for your organization’s users. Without a license, Copilot doesn’t appear for a user in Outlook, Word, Excel, or Teams. This requirement makes license assignment a fundamental administrative task, one that every admin should be comfortable performing. It also requires understanding the difference between assigning licenses individually versus at scale through groups.

The following sections describe the two methods for assigning licenses to users. While the steps required to assign a license through either method is relatively simple, the strategy of whether to assign individually or by group can affect administrative overhead, especially as your deployment grows.

Assigning licenses to individual users

Assigning licenses directly to a single user is the simplest method and is often the first approach a new admin learns. This method is best used when dealing with small organizations or when only a handful of users need access to Copilot. For example, if the CEO asks for Copilot access right away, you can quickly go into their user profile and enable the license without touching anyone else’s settings. It’s a targeted, controlled way of granting access.

One advantage of this method is precision. You have direct control over exactly who gets a license and when. Doing so makes it easy to test Copilot with a small pilot group before rolling it out more broadly. For instance, you might assign licenses to three people in your HR department so they can test how Copilot handles drafting job postings. After the test, you can remove the licenses if needed, all without affecting other HR staff.

The drawback of individual assignment is scalability. If you have dozens, or even hundreds, of users who all need Copilot, you can find yourself spending significant time repeating the same steps for each account. Mistakes are also more likely when done at scale. For this reason, admins usually start with individual license assignments for testing or executive requests, then move to group-based licensing when rolling out to departments or larger sets of users.

You should perform the following steps to assign a Copilot license to an individual user:

  1. Sign in to the Microsoft 365 admin center using your admin account.
  2. In the navigation menu, select Users > Active users.
  3. Select the user you want to assign a license to.
  4. In the user’s profile pane, select Licenses and apps.
  5. Select the box for Microsoft 365 Copilot (or the license package that includes it).
  6. Select Save changes.
Assign licenses through groups

Group-based licensing is the recommended approach for medium-to-large organizations, or whenever you want consistent license management across teams. The idea is simple: instead of assigning a license to each person individually, you assign it once to a group, and everyone in that group automatically inherits the license. For example, if your Sales department has 75 people, you can create a “Sales Users” group in Microsoft Entra ID and assign a Copilot license to that group. Any new salesperson added to the group immediately gets access without extra work from you.

This approach greatly reduces administrative overhead. You don’t have to remember to license each new hire individually or keep track of who already has Copilot. It also ensures consistency, since nobody is accidentally left out. Consider a scenario where the Operations team is expected to use Copilot daily to summarize Teams chats and draft Excel reports. By assigning Copilot to the Operations group, you guarantee every team member has the same tools, and you don’t risk gaps in coverage.

However, group-based licensing requires more up-front setup. You need to create and maintain the groups properly in Microsoft Entra ID and make sure membership stays accurate. For example, if someone leaves the company but isn’t removed from the group, they continue consuming a license unnecessarily. This reason is why many organizations implement periodic group audits or use automated provisioning workflows to ensure groups remain current. The trade-off is worth it, though, because once groups are configured, license assignment becomes almost effortless.

You should perform the following steps to assign group-based Copilot licensing:

  1. In the Microsoft 365 admin center, select Groups > Active groups.
  2. Select the group you want to configure.
  3. Select Licenses from the group settings pane.
  4. Choose Assign licenses, then select Microsoft 365 Copilot.
  5. Save your changes.

Enable pay-as-you-go billing policies for Copilot services

Microsoft offers more flexibility than traditional flat-rate licensing by allowing pay-as-you-go billing models. Instead of committing to a fixed number of Copilot licenses for all users, you can set up policies that allow specific departments or workloads to use Copilot on-demand. This approach helps organizations experiment with Copilot adoption or limit costs to departments where usage justifies the spend. This model is particularly useful for:

  • Departments experimenting with Copilot before committing to full licenses.
  • Seasonal or project-based workforces.
  • Organizations wanting to test adoption trends before investing broadly.

Policy-based restrictions are the foundation of pay-as-you-go management. In fact, without guardrails, pay-as-you-go can become expensive. Policies allow you to define who can use pay-as-you-go, set limits, and monitor costs. Admins must be deliberate in creating and managing these policies. Without them, anyone in your organization could potentially consume a license, which would quickly drive up costs.

By configuring policies, you limit access to specific users, groups, or departments that actually need Copilot. For example, you might set up your Legal team to use pay-as-you-go since their work involves drafting contracts and policies where Copilot is useful, but only at certain times of the year. By applying a policy, you ensure that only members of the Legal group can use Copilot on-demand.

The benefit of this method is control. It allows you to test Copilot in certain areas without committing to a full license rollout. Imagine that the Finance department is considering Copilot to help with quarterly reports. Instead of buying 25 full-time licenses, you can create a policy that makes Copilot available to them only on a pay-as-you-go basis. If, after two reporting cycles, usage data shows they’re using it heavily, you can then convert them to permanent licenses. The initial restriction prevents overspending during the trial phase while still giving them flexibility.

It’s also worth noting that policy enforcement helps avoid accidental consumption. If no restrictions are in place, even one curious user experimenting with Copilot could add unexpected costs to your billing statement. By building policies, you’re putting a safeguard around your budget while still giving specific teams access to experiment with the tool.

Enabling Microsoft 365 Copilot pay-as-you-go billing is a two-step process in the Microsoft 365 admin center, involving two different tabs on the Billing & usage page:

  • Billing policies. This tab is where you create and configure a billing policy. In doing so, you link an Azure subscription to the policy and define which users it covers.

  • Pay-as-you-go services. This tab is where you activate the Copilot pay-as-you-go service by connecting the newly created policy to a specific Copilot service (for example, Copilot Chat). Doing so turns on pay-as-you-go usage for the users defined in the billing policy.

Both steps are required to fully enable usage-based (consumption) billing for Copilot. This process even allows users without Copilot licenses to use Copilot, with costs charged on a per usage basis instead.

Step 1 – Create a billing policy

You should first perform the following steps to configure a pay-as-you-go billing policy. You can create multiple policies for different departments or groups, up to 10 per tenant. For each billing policy that you create, you must then connect it to a Copilot service for pay-as-you-go usage.

  1. Sign in to the Microsoft 365 admin center with either your Global Administrator, Billing Administrator, or AI Administrator account. You must have access to an Azure subscription and a resource group with owner or contributor permissions.
  2. In the Microsoft 365 admin center, select Copilot > Billing & usage in the navigation pane.
  3. On the Billing & usage page, select the Billing policies tab.
  4. In the Billing policies tab, select +Add a billing policy.
  5. In the Billing policy pane, enter a name for the billing policy. Then under Subscription details, choose one of the policy options:
    • Azure subscription
    • Resource group
    • Region
  6. Accept the Terms of service by selecting the corresponding check box.
  7. Select Next.
  8. Define the User scope by selecting one of the following options:
    • All users. Applies to everyone in the tenant.
    • Specific group. Applies to all members of a security group.
  9. Select Next.
  10. Define the budget for this policy by selecting Set a budget for this policy.
  11. Enter a budget limit (for example, $500/month).
  12. Choose when to reset the budget:
    • First day of the month
    • First day of the quarter
    • First day of the year
  13. Add recipients who should receive budget alerts.
  14. Set alert thresholds (for example, 80%, 100%).
  15. Review all settings. If necessary, edit any settings that must be corrected.
  16. When everything looks correct, select Create to finalize the billing policy.

This step Defines the billing arrangement but doesn’t by itself enable any Copilot features. Think of it as creating a billing plan associated with certain users. If you stop here, Copilot pay-as-you-go remains disabled for those users until the policy is connected to a Copilot service in the next step.

Step 2 – Connect the billing policy to a Copilot service

Once you create a billing policy, you must then perform the following steps to connect the policy to a Copilot service. Doing so enables the pay-as-you-go Copilot service for the chosen users. Once a billing policy is connected here, users in that policy can use the Copilot feature, and their usage accrues against the Azure subscription.

Warning

If this step is skipped, the Pay-as-you-go Copilot service stays disabled by default for the users assigned to the billing policy.

  1. After creating a billing policy, you should still be on the Billing & usage page. Select the Pay-as-you-go services tab.
  2. You must now select the Copilot service that you want associated with the billing policy. For example, if your goal is to enable pay-as-you-go for Copilot Chat, then select Microsoft 365 Copilot Chat. For enabling SharePoint-based Copilot agents with pay-as-you-go, you would select SharePoint agents instead.
  3. Next, you must assign the billing policy that you created in step 1 to the Copilot service that you selected in the previous step. Select the policy. Doing so connects the policy to the selected Copilot service.

    Note

    If you have multiple policies (for example, one for each department), you can assign more than one here by selecting each relevant policy. The service is then enabled for all users covered by any of the selected policies.

  4. Select Save to apply the change. Once saved, pay-as-you-go for the selected Copilot service is enabled for the users in the billing policy.
  5. On the Pay-as-you-go services tab, the status of the service should be updated to show that it’s now active with pay-as-you-go billing. Also, the Billing & usage dashboard should start showing usage data once users begin using Copilot under this policy.

You can also use the Pay-as-you-go service tab to later manage connections. For example, you can disconnect a billing policy to disable pay-as-you-go for that Copilot service. Or, you can connect other policies to a Copilot service if you have multiple user groups for which you want to enable pay-as-you-go for that service.