Understanding Google Workspace and Microsoft 365 Subscription Billing Terms

As the majority of small businesses use either Google Workspace or Microsoft 365 for their email services, it’s important decision makers understand the details of the billing terms. Fortunately, both companies now essentially have the same billing options. This article will not go into detail about the numerous subscription levels and products but is meant to specifically cover the billing terms available. Choosing the billing terms is a separate decision from choosing the best service or subscription level for your business needs.

Essentially both Google & Microsoft offer 3 different billing options: month-to-month, monthly payment with annual commitment, and annual payment with annual commitment. Any subscriptions automatically renew at the end of the billing term at the current market price, unless explicitly canceled by the account owner.

Monthly billing with Annual Commitment (recommended option by Gravity IT Solutions)

Selecting monthly billing with an annual commitment locks you into the lowest per-license pricing for whatever services you sign up for. In exchange for the lower pricing, you must commit to the service for a period of a year. The date you sign up for services will be the start date of your annual commitment. Your renewal date will be exactly one year after your start date. The number of users you have on your start date will be the minimum number of users you will be required to pay for during the entire year. During the year term, if you need to increase the number of licenses, they are added on a prorated basis. You’ll only be required to pay from the date the increase occurred but your minimum number of licenses will increase to the new level for the remainder of the term. If your license count decreases, you will still be required to pay the minimum monthly amount which is the highest number of licenses you had at any point during the year. You will only be able to reduce your user count, once per year on or before your renewal date.

Annual billing

Selecting annual billing requires that you pay for all subscriptions at once for the year on your start date. Licenses added during the year are pro-rated but increase your license floor. There is no price advantage of paying annually compared to the monthly billing with annual commitment. Annual plans only make the most sense when there are just a few users and there aren’t any anticipated changes to the user count. If you reduce licenses or cancel your account, there are no refunds for unused periods of the year.

Month-to-Month / Flexible billing

A month-to-month billing option offers the most flexibility in terms of being able to increase or decrease the number of licenses you purchase throughout the year. It also has the highest license price per month. In this article, the term license usually refers to a mailbox or a user. Month-to-month typically makes sense if you know you will have drastic decreases in staff or plan to reduce services during the next year.

Managing your account

Regardless of your billing terms, it’s important to have a good process for terminating employees, reviewing, and deleting unused mailboxes and licenses to avoid paying for unnecessary licenses. On the renewal date, you want to have the lowest number of licenses possible. We have strategies in place including a standard hiring and termination process. Feel free to reach out if you need assistance.

Email Services vs Software Subscriptions

I want to take a quick moment to separate email services from software licensing services. Particularly with Microsoft, these two distinct services can get grouped together. As a business owner, you are purchasing an email platform and then you have to also purchase your software licenses. It is important to know that with software specifically, you can either purchase software as a perpetual one-time purchase or as a subscription. As a general rule, you will usually save money by purchasing perpetual licenses but subscriptions do offer some advantages, especially in larger companies. Choosing the right purchase option and level of subscription can save you significant amounts of money over time. On the contrary, it’s common for us to come across clients who are double paying for unnecessary services or licenses.

The bottom line is that Gravity IT Solutions is available to help you optimize your subscription and software purchases. Feel free to schedule a call with us to answer your questions and provide assistance.

Additional Resources

Google Workspace – Compare Flexible & Annual/Fixed-Term payment plans


If you are an existing client, click here to confirm you billing term selection.