What is usage-based billing for Copilot?
Usage-based billing is Microsoft's metered way of charging for Copilot Cowork. Instead of a fixed price per person, your tenant is billed for the Copilot Credits its people actually spend each month, in US dollars, on top of the licences you already pay for. It has to be switched on deliberately in the Microsoft 365 admin centre before Cowork works at all.
This is the part of Copilot pricing that behaves differently from everything else in Microsoft 365. Licences are predictable - a price, a headcount, a monthly total. Usage-based billing isn't: the bill follows behaviour, and behaviour changes as people discover what Cowork can do.
Setting it up means three things in the admin centre: a payment method (an Azure subscription sits behind it), a spending policy, and a decision about who's allowed to use Cowork. Tenants that skip this step don't accrue surprise charges - Cowork simply isn't available. Tenants that set it up and leave the limits open are the ones that get the surprising invoice.
The honest budgeting approach is to treat the usage line as a range, not a number. Model it, set caps at the top of the range you're comfortable with, and review the first two months' actual spend before you widen access.
No - it sits on top. Each person still needs a Copilot licence to use Cowork; usage-based billing covers the Cowork work itself. You pay for both.
It's billed through Azure, priced in US dollars, so it arrives separately from your Microsoft 365 licence invoice. Finance teams should expect two lines, not one, and an exchange-rate effect on the usage line.
The definitions are the easy part. Whether Cowork is the right spend is a different question.
We help established UK businesses get a clear view of what they're already running - before they add more on top.