Hi! You are properly licensed for using SSPR as SSPR is included in the Free tier of Microsoft Entra.
For any users that are synced with your on-premises Active Directory, they will need to be licensed with a Microsoft Entra P1 license. Providing the user are SSPR ready, SSPR is enabled and password write-back is also enabled in Microsoft Enta Connect, all should be fine.
Users who are not licensed should be licensed if they are going to benefit from the features to comply with your agreement with Microsoft, but they won't be physically blocked...
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