office 365 license group assignment

Office 365 Automatically Assign License to Group

I like to automate as much as possible, and one of those repeating tasks is license assignment in Microsoft 365. You can automate the creation of users. It’s even possible to assign an Office 365 license with PowerShell. But most of the time it’s still a manual process, one that is prone to mistakes.

The problem, especially with medium or larger organizations, is that you create the users in the on-premise Active Directory. New users need to be synced to Azure AD (which we can force), after which we can assign a license.

But what if you are out of licenses? You will first need to increase the number of licenses or even order extra through your MSP or finance department. That takes time.

And when the news licenses are added, you will need to log back into the Admin Center to assign the license (which happens to be the part that I forget sometimes..)

The solution? Assign licenses to a group in Office 365.

Getting started

To get started with Office 365 group-based licensing, we first need to create groups to which we can assign the license too. You can create the (security) group in your local AD or in Azure Active Directory. It’s also possible to use existing groups, like department groups that you maybe already have.

For Azure AD you will need to login into Azure AD Admin Center .

• Select Azure Active Directory on the left side
• Choose Groups
• Click New group
• Set the Group type to Security
• Give the Group a name , for example, O365_E3
• Click on Create

Adding users to the Group

I already had Office 365 E3 licenses directly assigned to the users. So what I have done is used a small PowerShell script to get all the users with an E3 license and added them to the new security group.

You will need to have the Microsoft Online Service module installed for PowerShell. We are first going to get the AccountSkuId for the license that we want to assign.

The AccountSkuId is buildup with your tenant name and an ID of the product. For Office 365 it’s ENTERPRISEPACK and for E5 ENTERPRISEPREMIUM

The next step is to get all users with the E3 license and add them to our new group. When you are using an on-premise Active Directory, then use the script below:

If you are using only Azure Active Directory then you can use the following script:

Office 365 Group-Based Licensing

With the new group created and the users copied (or manually added) to the new group, we can now start with assigning the Office 365 license to the Group.

http://portal.azure.com

Find the new group that we have created and select licenses on the left side

Inherited vs Direct licenses

Users can have directly assigned licenses and inherited licenses. Directly assigned are the licenses that you have manually assigned to the users. The inherited are the licenses that the users gets based on the group membership.

If you already had manually assigned licenses to the users, then you will need to remove the directly assigned license. Not because they now have two licenses, but if you remove them from the group later, they will still have the directly assigned license.

• Open the Azure Active Directory in Azure AD Admin Center.
• Select Licenses
• All Products
• Open the license that you just have assigned to the group.

You will now see a list of all licensed users. In the column Assignment Paths, you will see how the user has gotten the license, Direct, or Inherited. Behind inherited you will also see from which group the user has inherited the license.

Select the users with the direct and inherited licenses and click Remove License to remove the direct license.

The users won’t notice anything from the removal as long as you keep the license and services the same. Otherwise, test it first with a small group of users.

Wrapping Up

You can assign users to multiple groups, so you could create a base group with Office 365 E3 for example and a separate group with PowerBI Pro. Using multiple groups, and each group for one license, gives you more flexibility when it comes to assigning licenses to the user in Microsoft 365.

Using Office 365 Group Based Licensing is easy to set up and takes way another manual step in creating and managing your users.

If you have any questions, just drop a comment below.

You may also like the following articles

Getting started with Conditional Access Policy

How to set up Microsoft 365 Backup

How to Setup Microsoft 365 Archive

35 thoughts on “office 365 automatically assign license to group”.

Good afternoon, everyone:

There is another point to bear in mind as of January 2024.

From what I’m reading in Microsoft’s documentation ( https://learn.microsoft.com/es-es/entra/fundamentals/concept-group-based-licensing ) and I understand, you need to have Azure Entra ID P1 or P2 if your 365 licenses are not Premium or E3.

A shame and a lot of cash

What about UsageLocation which can’t be specified with the group? How would we assign this? Some Licenses depend on this, and all licenses is not availble in certain countries.. 🙁

You will need to set the location of the user in Azure AD:

– Sign in to the Azure portal in the User Administrator role. – Go to Azure AD > Users and select a user. – Select Edit properties. – Select the Settings tab and enter a location for the user.

Hi Rudy, I figured out you can automate this in AzureADConnect to automatically full this in based on the attribute ”c”, since it’s a common thing for Servicedesk/HR to fill out 🙂

Hi! Did all the steps. It all worked out. Great article!

But I don’t understand how to make when adding user to local group(AD on-prem) “License O365 E3” user will be added also to cloud group(Azure AD) and get license.

That is, tech support engineers don’t have access to Azure, but have access to local AD. I want them to be able to assign licenses from local AD.

If you have created the groups in Local AD, then they should be available in Azure AD for the assignment. You should then be able to follow the steps under “Office 365 Group-Based Licensing”

-Created a group in AD. -Synchronized it, it appeared in Azure -Added a user (AD) to the group -Synchronize it with Azure

The user did not show up in that group in Azure.

What am I missing?

That is odd, sounds like an issue with Azure AD Connect. Might be worth to double check the settings and check for errors.

You wrote: “But what if you are out of licenses? You will first need to increase the number of licenses or even order extra through your MSP or finance department. That takes time.”

This step is not omitted? If too few licenses are available, they are not automatically purchased. Even with a group assignment, enough licenses must be purchased. This cannot be automated …?

No, not that I am aware of. As far as I know, Microsoft requires human interaction to purchase licenses. Otherwise, your script could accidentally buy 1000 licenses for example.

Hi, I am using Power Automate to create a user and assign to group so that it will add the license automatically. However, it won’t generate any error if the license is not assigned because of license shortage. How can we set Azure to increase the number of license automatically? Or, at lease generate an error so that Power Automate can pick it up. Thank you.

I think your best option here is to first check how many licenses you have available and if that is 0 then send an email to purchase additional licenses. As far as I know you can’t purchase licenses through PowerShell.

Hello, Can we use PowerShell to configure Office 365 Group Based Licensing. I cannot find any option to assign a licenses to a dynamic group i created.

New-AzureADMSGroup -DisplayName “Dynamic Group 01” -Description “Dynamic group created from PS” -MailEnabled $False -MailNickName “group” -SecurityEnabled $True -GroupTypes “DynamicMembership” -MembershipRule “(user.department -contains “”Marketing””)” -MembershipRuleProcessingState “On”

Please is it possible to assign one license to two or more Azure AD Group? Thanks

Yes, you can repeat step 5 of “office 365 Group Based Licensing”

Hi Rudy Mens, after running the script for on-premise Active Directory, all Users get the Migrate state “False”. Do you have any advice?

Did you check the Get-MsolAccountSku result that it matches the AccountSkuId on line 2 of the script?

Great article! Will this work with nested groups (AD groups synced from AD to Azure)?

Yes, that’s exactly how I am using it as well. Users are members of a group in the local AD.

Sorry, I wasn’t clear – I meant nested local AD groups synced to Azure. Let’s say User1 is a member of Group3, Group3 is a member of Group2, Group2 is a member of Group1. Licenses allocated to Group1. Will User1 get license allocated? Looks like it didn’t work for me and licenses allocated only to direct members of the group.

Ah yes, that is indeed a good question. I have no idea if that will work, will have to test it out as well.

OK, nested groups won’t work 🙁

“Group-based licensing currently does not support groups that contain other groups (nested groups).”

https://docs.microsoft.com/en-us/azure/active-directory/enterprise-users/licensing-group-advanced

Bummer, thanks for sharing!

in the azure script is a little error. The line: try { # Try to add the user to the new group Add-MsolGroupMember -GroupObjectId $groupId -GroupMemberType User -GroupMemberObjectId $user.ObjectId -ErrorAction stop

Should be: try { # Try to add the user to the new group Add-MsolGroupMember -GroupObjectId $groupId.ObjectId -GroupMemberType User -GroupMemberObjectId $user.ObjectId -ErrorAction stop

Thx for the post!

Hi, This works well but how can we prevent users do become member of two groups. For example Microsoft Business Premium and Office E1?

You can first get all the existing users with one of the licenses and check if the user isn’t present in one of the two lists.

With the code below you can get all users with a specific license # Get all users with the Office 365 E3 license $msolUsers = Get-MsolUser -EnabledFilter EnabledOnly | Where-Object {($_.licenses).AccountSkuId -eq 'lazydev:enterprisepack'} | Select DisplayName,UserPrincipalName,ObjectId

Wondering if you have tried using powershell to assign a license to a group or is it only done through the GUI

I haven’t done that. You can assign a license to a user w ith PowerShell though

We have Office 365 E3 licenses. Do you happen to know if this will work for them? The documentation says “Office 365 Enterprise E3” which I think it technically different.

This will work with every Office 365 license

Group based, when you have 9 on-prem forests syncing to one tenant,each with different particularities

You can create different license groups in Azure. To assign the users to their groups you will need to use filters to select the correct users from the Active Directory.

How would you do this when merging 10 entities, 9 on-prem and one cloud to a single tenant?

Do you mean how to assign the licenses to the users?

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Assign Microsoft 365 licenses with group-based licensing

• Updated on March 6, 2024
• Azure , Microsoft 365

What is an excellent way to manage and assign Microsoft 365 licenses? If you have a small organization with a few users, you can assign Microsoft 365 licenses directly to the user. If you manage a large environment and want structure, your best way is to assign Microsoft 365 licenses with group-based licensing. In this article, you will learn how to configure group-based licensing.

Table of contents

Assign microsoft 365 license directly to user, microsoft entra id group-based licensing, microsoft entra id group-based licensing requirements, 1. create security groups on-premises, 2. sync security groups to microsoft entra id, 3. verify security groups in microsoft entra id, 4. assign microsoft 365 licenses to group, 5. add user to security group, 6. verify license assignment paths.

If you don’t have many users in the organization, you can assign the Microsoft 365 license directly to the user:

• Sign in to Microsoft Entra admin center
• Expand Identity > Users > All users
• Click on the user
• Select Licenses
• Click + Assignment
• Select the License
• Check which license options you want to assign to the user

When you assign a Microsoft 365 license directly to a user, the Assignment Paths column shows that it’s Direct assigned.

A better situation is to create groups, and manage the Microsoft 365 licenses from there. How will that work? Let’s see in the next step.

Microsoft Entra ID includes group-based licensing, which allows you to assign one or more product licenses to a group. Microsoft Entra ID ensures that the licenses are assigned to all members of the group. Any new members who join the group are assigned the appropriate licenses. When they leave the group, those licenses are removed. This licensing management eliminates the need for automating license management via PowerShell to reflect changes in the organization and departmental structure on a per-user basis.

Read more: What is group-based licensing in Microsoft Entra ID?

You must have one of the following licenses to use group-based licensing:

• Paid or trial subscription for Microsoft Entra ID P1 and above
• Paid or trial edition of Microsoft 365 Business Premium or Office 365 Enterprise E3 or Office 365 A3 or Office 365 GCC G3 or Office 365 E3 for GCCH or Office 365 E3 for DOD and above

How to configure group-based licensing in Microsoft Entra ID

Go through the below steps to set up group-based licensing in Microsoft Entra ID:

We recommend you create a base group, which you will assign the must-have Microsoft 365 products. Create other groups for products that not everyone needs to use.

If you have everything in the cloud, create the security groups in Microsoft Entra ID. Suppose you have a Hybrid environment, create the groups in on-premises AD.

In this example, we will create two groups in Active Directory Users and Computers:

• M365_Licenses_E3_Base
• M365_Licenses_E3_Exchange

The security groups will look as below.

• Sign in on the Azure AD Connect server
• Start the Azure AD Connect application
• Verify in Azure AD Connect that the OU where you placed the security groups is enabled for syncing

• Wait a maximum of 30 minutes, and it will synchronize the objects or speed up the process and Force sync Azure AD Connect by running the below command

To verify that the security groups appear in Microsoft Entra ID, follow the below steps:

• Expand Identity > Groups > All groups
• Search for the on-premises security groups
• Verify that the on-premises security groups appear in the list

To assign a Microsoft 365 license to a group, follow these steps:

• Click on the group
• Click Licenses > + Assignments

In our example, it’s the group M365_Licenses_E3_Base .

• Select the license
• Check which license options you want to assign to the group

• Do the same, but this time add the group M365_License_E3_Exchange
• Select the license option Exchange Online (Plan 2)

To add the user to the security group, follow the below steps:

• Start Active Directory Users and Computers
• Add a user to the group M365_License_E3_Base

• Force sync with Microsoft Entra ID
• Click on Members and verify you see the synced user in the list

• Verify that Inherited (group name) appears in the column Assignment Paths

Note: An excellent method to check the Assignment Paths is with PowerShell. Read more in the article Check Microsoft 365 user license is direct assigned or inherited from group .

Everything looks great!

You can assign Microsoft 365 licenses in bulk by adding all the users to the security group on-premises.

In the next article, we will look at Exchange Hybrid test plan .

You learned how to assign Microsoft 365 licenses with group-based licensing. This setup will help user management and licensing for every organization significantly. There are no more challenges when assigning licenses, and everything is organized in groups.

Did you enjoy this article? You may also like the Exchange Hybrid course . Don’t forget to follow us and share this article.

ALI TAJRAN is a passionate IT Architect, IT Consultant, and Microsoft Certified Trainer. He started Information Technology at a very young age, and his goal is to teach and inspire others. Read more »

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Hi, I am looking for a similar Group based licensing, but for cloud only accounts. Can you suggest a way in which we can do that through Dynamic Grouping?

You can check below document where Dynamic grouping is explained also you need to create Security group with “Membership type” is “Dynamic user”

Docs: https://learn.microsoft.com/en-us/azure/active-directory/enterprise-users/groups-dynamic-membership

I did not had this configured. Now I do. This will help a lot. Thanks.

Your attention to detail is perfect. Great work as always.

Just what I needed. So much easier to manage. Thanks!

I ask out of curiosity .

1. I created a group “Communication_Basic” with Business Basic licenses with plan: Exchange, MS Teams and SharePoint 2. I added user to that group and after while he got Business Basic license with Exchange, Teams and SP.

And question is –

3. If I want assign another (additional) license for user – for example Whiteboard – the group assign licenses won’t override this and remove that licenses?

Greetings, Przemek

Hi Przemek,

You can’t assign the “Whiteboard” license directly to the user because the licenses section is greyed out and shows the message:

“This is inherited by group-based licensing and can’t be changed here. Manage group-based licenses in the Azure portal.”

It’s best for you to:

1. Create a new security group. For example, give it the name “Communication_Whiteboard”. 2. Assign the license “Whiteboard” to the group that you created in step 1. 3. Assign the security group to the user.

The user will have “Communication Basic” assigned licenses and “Communication_Whiteboard” assigned license. These are the licenses for Exchange, MS Teams, SharePoint, and Whiteboard.

It’s the same example as I did in the article. Only I used Exchange Online instead of Whiteboard.

Thanks for reply. Great blog by the way

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Auto-Assign Licenses with Group-based Licensing in Microsoft 365

Dealing with the nuances of license management within Microsoft 365 has long been a challenge for administrators. The complex task of assigning and transferring licenses to each user individually can lead to inefficiencies and errors that hamper overall productivity. However, the solution lies in a game-changing approach called group-based licensing . By creating groups based on users’ roles, departments, or teams, this innovative feature provides a streamlined way to manage licenses. This task can be accomplished with the Azure portal (Entra admin center) or PowerShell. 

Let’s dive into the nitty-gritty of improved license management and 🔎 explore the possibilities of group-based licensing.

What is Group-based Licensing in Microsoft 365?

Group-based licensing allows you to assign one or more license subscriptions to a Microsoft 365 group. Licenses assigned to the group are added to everyone who is added to the group, and the licenses are removed when they are removed from the group.

Prerequisites For Group-based Licensing

Your organization must meet the following prerequisites to process the group-based licensing. 

• Microsoft 365 Business Premium 
• Office 365 Enterprise E3 
• Office 365 A3 
• Office 365 GCC G3 
• Office 365 E3 for GCCH 
• Office 365 E3 for DOD and above 

Note: You must be a license administrator, user administrator, or global administrator to utilize group-based licensing.

Set Up Group-based Licensing in Microsoft 365

Setting up group-based licensing in your Microsoft 365 environment is a straightforward process. Microsoft 365 Admins can set it up with any of the following methods.

• Create a group-based license in Azure portal  
• Assign group-based licensing using PowerShell  

Note: Admins must specify the usage location of the user, before assigning a group-based license. If not, the usage location will inherited from the location of the directory.

Create a Group-based License in Azure Portal

To create a group-based license in the Azure portal, you need to follow the below two steps. 

• Create a group in the Azure Active Directory  
• Assign licenses to groups in Azure AD  
• Verify group-based license assignment  
• Check Microsoft 365 license assignment path  

Create a Group in the Azure Active Directory

The first step for the creation of a group-based license is to create a group in the Azure Active Directory. To create a group using the Entra admin center follow the steps below. 

• Log in to the “ Azure portal ” and head to the “ Azure Active Directory ” (Entra ID). 
• Navigate to the “ Groups ” tab and select the “ New group ” option. 
• Select the respective “ Group type ” and enter the “ Group name ”. 
• Click on “ No members selected ” and go to the “ Users ” tab. 
• Select the required users to assign group-based licenses. 
• Click on the “ Select ” button and select the “ Create ” button.

Assign Licenses to Groups in Azure AD

After the creation of groups with users, you have to assign licenses. Follow the procedure below to assign licenses to Microsoft 365 groups. 

• Head to the “ Licenses ” tab in the “ Azure Active Directory ”. 
• Go to the “ All products ” tab and select (tick) the appropriate licenses to be assigned. 
• Click on the “ Assign ” option. 

• Select the “ Add users and groups ” option. 
• Choose the “ Groups ” tab and select the respective group and click on “ Select ”.

• Click the “ Next : Assignment options > ” button and toggle “ On/Off ” the services available with the selected subscription pack.

• Click “ Next: Assignment options > ”, finally review the details and select the “ Assign ” option. 

Now the licenses will assigned to the selected group.

Verify Group-based License Assignment

You can easily verify the group-based license assignment in the “ Groups ” tab of the Entra ID. To do so, follow the steps: 

• Navigate to the respective group in the “ Groups ” tab. 
• Select “ Licenses ”, there you can see a notification message displaying “ License changes have been applied to all users ”.

This message represents the confirmation of the group-based license assignment.

Check Microsoft 365 License Assignment Path

To check whether the license is assigned directly or inherited from a group, follow the steps below. 

• Go to the “ All products ” tab and click on the selective licenses to be checked. 

Group-based Licensing Using PowerShell

Though the Entra ID helps admins to manage Microsoft 365 services, many admins rely on PowerShell for its time-saving capabilities and to perform bulk operations.  

You can adhere to the following steps to configure group-based licenses using PowerShell. As Microsoft has announced the deprecation of the Azure PowerShell modules, here we are using the Graph PowerShell module. Before getting started using PowerShell, make sure to connect to the Microsoft Graph PowerShell module. 

• Create group with Microsoft Graph PowerShell  
• Add users to group using Graph PowerShell    
• Apply license to the group using MS Graph  
• Check whether the license is directly assigned or inherited

Create Group with Microsoft Graph PowerShell

To create a group using graph PowerShell, execute the cmdlet below after replacing the respective values.

Substitute ‘true’ or ‘false’ based on your group needs. The ‘GroupTypes’ parameter with the value ‘Unified’ will create a Microsoft 365 group. To create a Security group, you can simply omit the ‘GroupTypes’ parameter.

Note: Please note the “ Id” after the creation of the group for future reference.  This value will be needed for the addition of users in the groups and the license assignment.

Add Users to Group Using Graph PowerShell

To add users to a group using the graph PowerShell, you must know the ” Id ” of each user to be added to the group.  To know the “ Id ” of all the users run the comment below. 

After the execution, take note of the “Id” for each respective user who will be added to the newly created group. Save these Ids in a CSV file following the format demonstrated below.

Once you create the CSV file, execute the following cmdlet with file location and group Id to add the users to the group.

Here, replace the <GroupId> with the Id, which is noted during the creation of the group.

Apply License to the Group Using MS Graph

Before assigning a license to the group, it is essential to determine the “ SkuId ” of the specific license to be assigned. To know the “ SkuId ” of the particular license, execute the cmdlet below.

Once you have the “ SkuId ”, use the following cmdlet, replacing the <GroupId> and <SkuId> with the appropriate values, to assign the license to the group.

Note: The above method would be useful for existing users to get group-based licenses. If you want to add users to the license group in the user creation itself, create a CSV file like the below format and execute the script.

Replace <FileLocation> with the actual CSV file location and <GroupId> with the corresponding group ID for the license group.

Check Whether the License is Directly assigned or Inherited

After the assignment of licenses through groups, admins can easily check the license assignment path whether it is assigned directly or inherited from a group. The following script can help you to get the license assignment type. Here, replace the <SkuId> with the “ SkuId” of the selective subscription.

The above script provides Microsoft 365 user report with the assignment type.

Common License Assignment Errors in Group-based License

The following license assignment errors may occur when you are assigning licenses in a group-based manner. 

Conflicting Service Plans: This error may arise if one of the products listed in the group includes a service plan that conflicts with another service plan already assigned to the user by another product. To resolve this, you need to remove the user from the group.  

This error displays as “ MutuallyExclusiveViolation ” in PowerShell. 

Not Enough Licenses: This error may occur if enough licenses are not available for the products that are specified in the group. You need to either purchase more or free up unused licenses from other users. 

This error displays as “ CountViolation ” in PowerShell.

Limitations Of Group-based Licensing

Below is a list of some of the commonly known limitations regarding group-based licensing. 

• Doesn’t Support Nested Groups: Group-based licensing currently does not include the ability to add groups that contain other groups. 
• Only Suitable with Security Groups: This functionality is limited to security groups and Microsoft 365 groups with the attribute “SecurityEnabled” set to true. 
• License Assignment Type Visibility in M365 Admin Center: Group-based licensing is not currently supported in the Microsoft 365 Admin Center. Licenses assigned or inherited through a group appear as regular user licenses in Microsoft 365 admin center. 
• Affect the Performance with Directory Synchronization: Assigning or changing licenses to a large group of users (say 100,000 users) can have a negative impact on directory synchronization with Azure AD and on-premises systems. 
• Problem with Dynamic Groups: It is vital to ensure that the user is a member of a dynamic group before proceeding with the license assignment. This is necessary to facilitate proper license assignment. 
• Difficulty with High Loads: During high-load situations, there may be delays in processing license changes for groups or membership changes for groups with existing licenses. In such cases, you may need to contact Microsoft Support Services for any assistance.

Gain Enriched Microsoft 365 License Reports with AdminDroid for Completely Free!

In fact, this blog provides essential insights into group-based licensing within Microsoft 365. However, efficient management of assigned licenses in your Microsoft 365 environment is equally important. Proper license management and monitoring ensure optimal utilization of resources and adherence to license compliance. Don’t worry! Now, simplify the license management in your Microsoft 365 environment at zero cost with the assistance of AdminDroid Microsoft 365 reporting tool .

AdminDroid’s Microsoft 365 License Reporting gives unimaginable and free license reports, eliminating the need for complex PowerShell cmdlets. AdminDroid Microsoft 365 license usage reports allow admins to get reports in a few clicks. It also enables admins to get free license-related reports with three sections:

License Reports:  

• All Licensed Users Report 
• Licenses Assigned for Sign-in Disabled Users Report 
• Users by Assigned Subscriptions Report 
• Detailed License Provisioning Report 
• Unlicensed Users Report 
• Users With Free Subscriptions Report 
• Users With Trial Subscriptions Report 

License Expiry Reports:  

• Users with Soon-to-Expire Purchased Subscriptions Report 
• Purchased Subscription Expired Users Report 
• Users with Soon-to-Expire Trial Subscriptions Report 
• Trial Expired Users Report 
• Users with Suspended Subscriptions Report 

Subscription Report:  

• Subscription Usage Report 
• Expired Subscriptions Report 
• Unused Subscriptions Report 
• Purchased Subscriptions Report 
• Trial Subscriptions Report 
• Free Subscriptions Report 

Moreover, AdminDroid’s free Azure AD reporting tool provides detailed reports of user-related information, giving administrators the ability to get Microsoft 365 user details. It generates extensive insights on Microsoft 365 user activities, user passwords, group activities, licenses, and subscriptions. 

Also, admins can grab the entire visibility and track changes over Microsoft 365 accounts and groups activity through Azure Active Directory management, which offers a robust suite of 190+ reports.

Additionally, AdminDroid offers 1800+ reports and 30+ dashboards for all Microsoft 365 services such as SharePoint, Exchange Online, MS Teams, Power BI, Yammer, etc. Admins can experience all these reports in their Microsoft 365 domain free for 15 days with the premium edition.

Discover the advantages of AdminDroid by downloading it today and enjoy the benefits of a 15-day free premium edition trial .

Wrapping Up 

In conclusion, we hope that the blog has provided you with an overview of group-based licensing in Microsoft 365. Do not stop with this! Give a try to auto-claim policies , which goes beyond group-based licensing. If you have any comments or questions, please don’t hesitate to contact us. We value your feedback and welcome any inquiries you may have!

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Assign licenses using the Group-Based licensing feature

Group-based licensing for security groups in Office 365. This is something that will reduce clicking, scripting, and admin burden overall. If this fits your organisation requirements and governance, then go for it! It’s a great feature.

Let’s see how we can start using it.  

Minimum requirements:

• Global Admin or User Management permissions
• Office 365 trial/paid subscription (E3 in my case)
• Enough licences in the tenant for users  

In my scenario, I have 2 fake users as follows:

• Georges has already been assigned a few services from the E3 license
• John is not licensed at all
• They are both part of the SG_HR security group  

Assign licenses to the Security Group

To start assigning licences, log into the Azure Portal with your admin credentials, or from the Office 365 Admin Center » All Admin Centers » Azure Active Directory.

Once in the Azure AD admin center, navigate to Azure Active Directory –> Licenses. Under “ licenses “, click on All products –> Choose your plan –> Click on Assign

Under Assignment options, select the services from this license that you wish to enable for the group. Here I’m only going to choose the main ones (EXO, SPO, Teams…) and remove all the “extras” like PowerApps, Flow, Stream…

Navigate above, under “ Users & groups ” –> Search for your group (and click on it) –> click on Select at the bottom of the page

Finally, click on Assign to assign the license to the group!

Check the license has been assigned

To check if the license has been properly assigned, navigate back to Licenses –> All Products –> click on the plan –> Licensed groups (left pane).

Another way is also to click on “ Licensed Users “, and notice how my 2 fake users are licensed:

• Georges is licensed directly AND via the group-based licensing
• John is licensed ONLY via the group-based licensing

Check in the Office 365 Admin Center

Let’s have a look at the Office 365 admin center now.

Remember that “John” was not licensed at all. He’s now only licensed through the group-based licensing model. Therefore, if I try to add services for him manually, and save those changes… We have a message telling us NOPE, you can’t do that! Well… in a nutshell that is…

“Georges” was already assigned some services, so it’s totally possible to change this manually…

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Entra ID / PowerShell

How to report microsoft 365 licenses assigned through group-based licensing.

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A Quick Refresher for Group-Based Licensing

In February 2017, Paul Cunningham reviewed group-based licensing . Apart from renaming Azure AD to Entra ID, making cosmetic updates to the admin center GUI, and refreshing the documentation , not much has changed in the way the solution works.

In 2021, Microsoft said that they would remove the requirement for Entra ID Premium P1 licenses following the transition to a new license management platform and support nested groups. The transition to the new platform has happened and no trace of the requirement is in the documentation, so that’s a welcome development that might make group-based licensing a more attractive option for tenants.

Group-based licensing is a simple and effective method to assign licenses. In a nutshell, it works as follows:

• Licenses and their options (service plans) are associated with a security group.
• As users join the group, Entra ID assigns the associated licenses to their account. If a user leaves the group, Entra ID removes the license.
• The scheme works as long as licenses are available for assignment. If a license isn’t available, Entra ID can’t assign a license until the tenant either buys more licenses or removes a license from another account.
• The only other problem is conflicting service plans. This occurs when Entra ID attempts to assign a license that includes a service plan that’s already available to the account via another license. The problem was most often seen with Exchange Online because many products include an Exchange Online Plan 1 or Plan 2 service plan. The advent of license stacking for Exchange Online in early 2023 removed this problem.

For the purpose of this discussion, I created a security group called Microsoft Fabric License Assignment Group and associated it with licenses for Microsoft Fabric and Power Automate (Figure 1). Members added to the group receive these licenses and the service plans enabled by the licenses.

Group-Based License Management

This article covers the basics of license management for Entra ID accounts using the Microsoft Graph PowerShell SDK. The assignments described in the text are direct, meaning that administrators or scripts run the Set-MgUserLicense cmdlet to add or remove licenses or service plans for user accounts.

With group-based licensing in use, direct assignments are not used. Instead, you add an account to the group used to control license assignments. For example, these commands find the identifiers for the target group and the user account to add and run the New-MgGroupMember cmdlet to add the member to the group. They’re examples of the kind of processing that you might do after adding a new account.

A couple of minutes later (assuming licenses are available), the account has the licenses assigned through group membership. As you can see from Figure 2, the account has one direct assignment and two inherited from the group.

When creating new accounts, it’s important that these accounts receive licenses as soon as possible as otherwise they cannot access any services. For this reason, any interruption to normal group-based license assignments should be investigated and rectified quickly.

To remove licenses assigned through a group, remove the account from the group membership using the Remove-MgGroupMemberByRef cmdlet:

Following the removal of the account from the group membership, Entra ID removes the licenses from the account within a couple of minutes. See this article for more information about group management using the Microsoft Graph PowerShell SDK.

Reporting Group-Based Licensing

Two years ago, I discussed how to create a licensing report for a tenant with Microsoft Graph PowerShell SDK cmdlets . That version of the report only handled direct license assignments. To upgrade the report to handle group-based licensing, the script that analyzes license data checks the licenseAssignmentStates array returned by the Get-MgUser cmdlet.

When a group-based assignment exists, the array holds information about the assigning group and the product identifier. An entry in the array is present for each product license assigned through group-based licensing.

It’s possible for an account to have licenses assigned directly and via a group. This doesn’t interfere with the services enabled by the licenses but duplicate assignments are a waste of licenses.

To include the data in the report, the script extracts the group assignments and loops through the set to resolve the group display name and product “friendly” name (like Office 365 E3). This information is then formatted and put into a variable that is subsequently included in the report. Here’s the loop to extract the group-based licensing assignments:

Figure 3 shows how group-based licensing assignments show up in the output report.

As a bonus, the report tells you when it detects duplicate license assignments and highlights accounts that haven’t signed in recently. Administrators can use this information to remove duplicate licenses and consider if the licenses assigned to accounts that aren’t in active use can either be removed or replaced with a lower license. For instance, you might be able to assign an Office 365 F1 license to an account and remove its Office 365 E3 or E5 license. Finally, the report summarizes the product SKUs assigned to users within the tenant (Figure 4).

You can download the updated script from GitHub . If you’ve downloaded the script before, make sure that you have version 1.3 or later.

Update: The latest version of the script includes code to report license costs. See this article for more information.

Group-Based Licensing Worth Considering

Group-based licensing isn’t difficult to set up or manage. It’s definitely a method worth considering for license management if you’re confident that license availability won’t be a problem. If you haven’t tried group-based licensing yet, why not start with a relatively unimportant license and see whether this mechanism fits into your tenant management strategy. And when you’ve assigned some licenses with groups, remember to run the report to see if any duplicate assignments exist.

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Tony Redmond

I got an error on line 19. Try to create an index of a NULL-Array.

Es ist nicht möglich, einen Index auf ein NULL-Array anzuwenden. In C:\Temp\ReportUserAssignedLicenses-MgGraph.PS1:19 Zeichen:11 + [string]$LicenseCost = $PricingHashTable[$License] + ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ + CategoryInfo : InvalidOperation: (:) [], RuntimeException + FullyQualifiedErrorId : NullArray

The license GUID pointed to in the $License variable does not exist in the $PricingHashTable. Adding cost details to the script was a recent upgrade (see https://practical365.com/report-user-license-costs/ ). Have a look at the CSV file containing subscription info and check the licenses assigned to the user being processed to find the problem license.

Is it possible to mix month-to-month and yearly licenses of the same type (Microsoft 365 standard for ex)? Does entraID differentiate those, or it’s just the license type what matters. For ex. we have 10 yearly and 10 monthly licenses, and 5 teams of 6 teams with 3 members each. When we are assigning licenses to those teams, can we just assign Standard license to each team, and EntraID will take what’s needed? Or ween need to assign monthly license to one team, and yearly to another?

AFAIK, Entra ID doesn’t distinguish monthly and yearly licenses when it comes to the license assigned to accounts, so you should be able to issue licenses via direct and group-based assignments as you want. The issue arises in the subscription renewal date. Monthly licenses obviously can expire sooner…

Thank you very much for the script, it helps me a lot. I have one more suggestion: Would it be possible to include a check to see if a user really has a license or if it was just assigned to him by a group but he didn’t get it because of missing licenses? Then it would fulfill all the requirements I need

A user has a license or they don’t. There are no phantom licenses to check…

What you could do is check for user membership in groups used to assign licenses and then against the set of assigned licenses held by the account. If the licenses differ, you know you’ve got a problem with group-based licensing.

Any idea what could generate this error and how I can resolve it? Cannot convert value “27-Dec-2023 15:41:01” to type “System.Int32”. Error: “The input string ’27-Dec-2023 15:41:01′ was not in a correct format.”

That’s an odd error because it indicates an attempt to convert a date into an integer. When in the script does this occur?

Cannot convert value “05-Jan-2024 12:32:49” to type “System.Int32”. Error: “Input string was not in a correct format.” At C:\Users\OneDrive\_PowerShell\ReportUserAssignedLicenses-MgGraph\ReportUserAssignedLicenses-MgGraph.PS1:101 char:7 + $DaysSinceLastSignIn = ($RunDate – $LastSignInDate).Days + ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ + CategoryInfo : InvalidArgument: (:) [], RuntimeException + FullyQualifiedErrorId : InvalidCastFromStringToInteger

I’m in the netherlands, could it be a time zone/locality thingy?

I suspect it’s a local configuration setting for PowerShell. The date looks fine in terms of being in an English format. This format might be unacceptable for PowerShell configured to use the Dutch locale. See https://devblogs.microsoft.com/scripting/use-culture-information-in-powershell-to-format-dates/ and https://devblogs.microsoft.com/scripting/formatting-date-strings-with-powershell/

Replacing [string] with [datetime] in line 11 solved the problem for me!

Looking at this again, the string assignment

[string]$RunDate = Get-Date -format “dd-MMM-yyyy HH:mm:ss”

Might not work in non-English locales. Changing it to an explicit date/time would make it work. The variable is only used in report output, so it can be in whatever format you want…

In my tenant, almost everything is reported as duplicated. I think this is because skus assigned by a group pop up in $User.AssignedLicenses

I found some bugs that I fixed in version 1.4. Please download from GitHub and give the code a try out.

First and foremost, I’d like to express my gratitude for your continuous contributions to the community. Your work has been instrumental in aiding many individuals and organizations in managing their IT resources more effectively. I downloaded Version 1.3 today and wanted your thoughts regarding a challenge I encountered while utilizing your ReportUserAssignedLicenses-MgGraph.PS1 script. Specifically, I was testing the script and noticed an issue with the output data in the Microsoft365LicensesReport.CSV (and .HTML). It appears that the license value is present in the “Direct assigned licenses” column for all users (which I know is not accurate in my tenant), and I was hoping to understand whether this is the expected behavior or point me in the direction to get this resolved?

I think I need some more information from you to fully understand what issue you’re encountering. The value in the Direct assigned licenses column in the set of licenses directly assigned (by admins) to a user account. I see the correct licenses for the users shown for my tenant. You seem to be saying that you see an incorrect value. If so, can you run the Get-MgUserLicenseDetail cmdlet for one of the affected accounts and report the output here.

PS C:\Windows\system32> get-mguserlicenseDetail -UserId “Edward#######” | ft Id SkuId SkuPartNumber — —– ————- hr6frJHNBUGIN57CVSj4Su7E6wa1G91HgSARMkvFTgY 06ebc4ee-1bb5-47dd-8120-11324bc54e06 SPE_E5

Try Version 1.4 that’s now in GitHub.

For instance, if you look at the Direct assigned licenses column shown in Figure 1 in the article, you see that different licenses are reported for different accounts. These values come from Get-MgLicenseDetail.

Hi Tony! I was reading the document https://learn.microsoft.com/en-us/azure/active-directory/fundamentals/concept-group-based-licensing and unfortunately it is a requirement to still have Microsoft Entra ID P1 and above or Microsoft licenses 365 Business Premium or Office 365 Enterprise E3 or Office 365 A3 or Office 365 GCC G3 or Office 365 E3 for GCCH or Office 365 E3 for DOD and above.

Yes, that’s the current position. But it’s also true that Microsoft made a commitment to remove the Premium P1 requirement when they migrate Entra ID to a new licensing platform. According to Alex Simons, VP for Marketing in Entra ID, that work is still progressing, but it will conclude sometime. The only question is when.

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How to Setup Group Based Licensing in Microsoft 365

• Post author: Daniel Bradley
• Post category: Microsoft 365 / Microsoft 365 User Management / Tutorials
• Post last modified: April 11, 2023
• Reading time: 7 mins read

Group-based licensing in Microsoft 365 or Azure Active Directory is a quick and effective way to manage your user license assignments. It means that when a new user (or existing user) is added to a group with group-based licensing, then that user is automatically assigned a license. This is particularly helpful when managing a large number of users, such as during migrations and take overs, or even during ongoing user management by simplifying onboarding processes. 

In this tutorial, I am going to show you how to setup group-based licensing in Microsoft 365.

Page Contents 

Requirements for group-based licensing

What are the benefits, assign licenses to a group, migrate users to group-based licensing, view the group licensing status.

To use group-based licensing, you will need to have at the minimum an Azure AD P1 license for every user that will benefit from it. Although this might seem a little backward, there is nothing to worry about. As soon as you add a single Azure AD P1 license, the features become available, so you can then configure your group-based licensing to assign both your Azure AD P1 license and any other licenses you wish.

You should also be conscious that you still need enough available (unassigned licenses) to assign to your users. For example, if you create a new group that will automatically assign M365 Dynamics licenses to staff and you add 10 users to that group. You need to ensure you have 10 available licenses ready to be assigned automatically.

It goes without saying one of the primary benefits is easy and simplified license management, enabling streamlined onboarding and change processes as well as simplified administration, removing the need to assign and remove licenses manually.

However, consistency and security should also be considered when deciding on group-based licensing. By ensuring a well-defined group structure you can clearly overlook which licenses are assigned to which user. By incorrectly or over-licensing users you are risking exposing them to data which they should not be able to see, either directly or indirectly which would be perfect for an attacker.

I won’t be going through how to create a group in Azure Active Directory in this tutorial, however, if you want to know how to create a security group using Microsoft Graph PowerShell, then you can check out my guide: How To Create Groups With Microsoft Graph PowerShell .

1. Start by logging into the Azure Active Directory admin center and select Groups .

2. Select your group from the list, then on the left-hand menu, select Licenses .

3. Select the Assignments button and check the license you wish to assign to this group (it could be a single license or multiple), then click Save .

Migrating licensing assignments to groups is quite simple and if done correctly will have zero impact on your end users.

Assumingly if you are migrating users to group-based licensing, atleast some already have licenses directly assigned. Luckily Microsoft have made the migration quite simple and as such, your users can have the same license directly assigned and also assigned via group membership. For example, you may have long standing users who were manually assigned licenses which you want to migrate, you can add them to the necessary licensing group then manually remove their direct assignment.

During the inbetween period where licenses are assigned both ways, only a single license is consumed so you don’t have to worry about over spending or over using licenses. Also, by removing their direct assignment, the user will remain ‘licensed’ via the group membership and there will be no loss of service for the user.

If you want to learn how to bulk remove licenses using PowerShell (if you have many users for example), take a look at my guide: How To Assign User Licenses With Microsoft Graph PowerShell and read the Remove multiple licenses section.

The critical step while migrating to group-based licensing is to ensure licenses are correctly assigned by the group before removing the direct assignement.

1. Start by logging into Azure Active Directory > Users and select the one of the users you are migrating.

2. From the left-hand menu select Licenses . This will display a list of licenses assigned to the user.

3. You can see from the license list, that your target license is both directly assigned and inherited from the group.

You can also remove the direct assignment here by selecting the license and clicking Remove license.

By refreshing the page, you can now see that only Inherited is listed under the assignment paths.

Validate this has worked correctly first for a couple of users before you bulk remove licenses from all users.

Daniel Bradley

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Office 365 group-based licensing.

One of the things that Office 365 administrators need to manage day to day is licensing. There are some 80 plus subscriptions, services and add-on’s you can purchase through Microsoft 365 and most of them require users to be assigned licenses before they can use them. Add to this the fact that the subscriptions offered by Microsoft are actually a bundle of individual services which can be enabled or disabled and we have an administrator’s nightmare.

Azure AD group-based licensing to the rescue

Up until the release of group-based licensing, administrators had to manage licenses individually for each user, create and maintain PowerShell scripts or use expensive third-party applications. Just as the name suggests, group-based licensing allows administrators to assign licenses to a security group. Azure AD then ensures that this license is then assigned to all members of that group. Even better, the license assignment is dynamic, so when users are added or removed, Azure AD makes the appropriate license changes to the user. The only requirements for group-based licensing are that the groups must be security groups and you must have enough licenses to grant to the Azure aroup members … that’s it! The groups can even be synchronised from on-premises AD, meaning you can assign Office 365 licenses by adding a user to a group in AD. Brilliant!

One of the really cool things about how Microsoft has implemented this is that when a license is applied to a group you have the option of turning off one or more of the service plans included in that license. For instance, if your organization is not yet ready for To-Do, Forms, Stream, StaffHub or Flow, you can easily disable one or more of these services when assigning them to the group. The below screenshot shows how individual services can be disabled when assigning a license to a group.

Once the group is configured, you can now easily manage licensing by adding and removing users from that group. When you decide it’s time to roll out a new service, all you need to do is enable that service plan. Nightmare over!

Another Bonus – Create Multiple Groups

One other bonus for group-based licensing is that you can create multiple groups for the same subscription but disable different services. If a user was a member of more than one of these groups, they get all the enabled services, but still only use a single license for billing purposes.

Admins can assign a license to a group via the Azure AD admin center. Simply select the license you wish to assign and click Assign.

You then select the security group you wish to assign the license to ( R emember, it can be a group synced from on-premises AD), and the license options you wish to assign to a member of that group ( see Figure 1 ) .

If you would like more information on group-based licensing or Office 365 in general, don’t hesitate to reach out.

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Assign Microsoft 365 licenses to user accounts

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This article applies to both Microsoft 365 Enterprise and Office 365 Enterprise.

For the cloud-only identity model, you can assign Microsoft 365 licenses to user accounts as they are created, depending on how you create them.

For the hybrid identity model, when Active Directory Domain Services (AD DS) user accounts are synchronized for the first time, they are not automatically assigned a location or a Microsoft 365 license. You must configure each user account with a user location prior to or along with assigning a license.

In either case, you must assign a license to user accounts so your users can access Microsoft 365 services, such as email and Microsoft Teams.

You can assign licenses to user accounts either individually or automatically through group membership.

To assign Microsoft 365 licenses to individual user accounts, you can use:

• The Microsoft 365 admin center
• The Microsoft Entra admin center

Group-based licensing

You can configure security groups in Microsoft Entra ID to automatically assign licenses from a set of subscriptions to all the members of the group. This is known as group-based licensing . If a user account is added to or removed from the group, the licenses for the group's subscriptions will be automatically assigned or unassigned from the user account.

Make sure you have enough licenses for all the group members. If you run out of licenses, new users won't be assigned licenses until licenses become available.

You should not configure group-based licensing for groups that contain Azure business to business (B2B) accounts.

For more information, see group-based licensing in Microsoft Entra ID .

With the appropriate set of user accounts that have been assigned licenses, you are now ready to:

• Implement security
• Deploy client software, such as Microsoft 365 Apps
• Set up device management
• Configure services and applications

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