How to Handle Unlicensed Microsoft 365 Users When Employees Leave
Question details
An administrator needs to know whether to keep former employees as blocked, unlicensed users or delete their accounts after preserving their mailbox and OneDrive data in Microsoft 365.
- Product
- Microsoft 365
- Device & OS
- not provided
- Scenario
- Employee offboarding and business data retention management.
- Observed behavior
- Determining the correct administrative process to secure business data, remove licenses, and manage the user account lifecycle after an employee departs.
Ensure you have global admin or user management admin privileges in the Microsoft 365 admin center, and notify relevant stakeholders before altering account access or data retention policies.
Block Sign-in, Preserve Data, and Delete the User Account
The best practice is to block the departing user, secure their data using holds or shared mailboxes, remove their license to save costs, and eventually delete the account.
Keeping unlicensed users indefinitely in your active directory can cause clutter. Instead, Microsoft recommends a structured offboarding process. You should first block their access, secure their Exchange and OneDrive data, free up their license for reuse, and finally delete the user object.
Go to the Microsoft 365 admin center, navigate to 'Users' > 'Active users', select the departing employee, and click 'Block sign-in' to prevent further access.
To save email contents, either apply a Litigation Hold (requires an Exchange Online Plan 2 license temporarily) or convert the mailbox to a shared mailbox under the 'Mail' tab. This allows other employees to access the historical emails.
In the admin center, select the user, go to the 'OneDrive' tab, and select 'Create link to files'. Share this link with a manager or another active user so they can download or transfer essential business files.
Go to the 'Licenses and apps' tab for the selected user and uncheck the assigned Microsoft 365 licenses. This frees up the license to be assigned to a new employee or removed from your billing.
Once all data is securely backed up or preserved via an inactive mailbox hold, select 'Delete user' to remove the account from your active directory.
Looking for a Cost-Effective Office Suite for Your Team?
Managing Microsoft 365 licenses can become expensive and complex, especially during employee turnover. Consider WPS Office as a free, lightweight, and highly compatible alternative for your team's document creation needs, offering a familiar interface without the heavy subscription costs.
- 1. Download WPS Office: Visit the official WPS website and download the installer for your operating system.
- 2. Install the application: Run the downloaded setup file and follow the straightforward on-screen instructions.
- 3. Open your documents: Launch WPS Office to instantly open, edit, and collaborate on your existing Microsoft Office files.
Frequently Asked Questions
Can I convert a former employee's mailbox to a shared mailbox to save their emails?
Yes, converting a user's mailbox to a shared mailbox is a standard practice. It allows you to retain their emails and grant access to other team members without paying for an additional Microsoft 365 license, provided the mailbox data is under 50 GB.
What happens to a user's OneDrive data when their Microsoft 365 account is deleted?
By default, when a user is deleted in Microsoft 365, their OneDrive data is retained for a grace period of 30 days. During this window, an administrator must assign access to another user to back up or move the files before they are permanently purged from the system.
How does a Litigation Hold affect an unlicensed departing user?
If a Litigation Hold or In-Place Hold is applied before the user account is deleted, the mailbox becomes an inactive mailbox upon user deletion. The email data is preserved securely for the duration of the hold, even without an active license assigned to the deleted user.
