Paying for Microsoft 365 E5 across every user account can leave you funding advanced tools that many employees never use. Choosing E3 too quickly can create the opposite problem, as security, compliance, reporting, or calling requirements can later require separate add-ons. During Microsoft 365 licensing reviews at Code Creators, we often find that both problems begin with the same mistake: every user receives the same license even though their responsibilities differ. Your legal team may need stronger compliance tools, your security team may need advanced threat protection, and your analysts may need Power BI Pro, while general office employees may only need the core features included with E3.
In this article, you will learn the main differences between Microsoft 365 E3 and E5, how E3 pricing compares with the Microsoft 365 E5 license cost, what E5 adds, and which license makes more sense for your users.
What Is the Difference Between Microsoft 365 E3 and E5?
Microsoft 365 E3 covers the main tools businesses need for daily work, communication, device management, identity control, and standard security. It gives employees access to Microsoft 365 applications while also helping IT teams manage users, devices, applications, and company data.
Microsoft 365 E5 includes the same core services but adds more advanced security, compliance, analytics, and calling tools. These added capabilities mainly support IT administrators, security teams, compliance departments, legal teams, and employees who work with business intelligence or phone systems.
In simple terms, E3 supports everyday business operations, while E5 gives organizations more control over risk, data, investigations, reporting, and communication.
The main difference, therefore, is not whether employees can use Office applications. Both licenses handle that well. The real question is whether your organization needs the additional protection, reporting, governance, and calling tools that come with E5.
Microsoft 365 E3 and E5 Pricing
The current US list price for Microsoft 365 E3 is $39 per user per month with an annual commitment. Microsoft 365 E5 costs $60 per user per month under the same billing arrangement.
That creates a difference of $21 per user each month, which works out to $252 per user per year.
The gap may appear manageable when you look at one license. However, the licensing reviews we have completed show how quickly the total rises as more users are added. For 500 users, the additional $21 per user each month increases the annual cost by approximately $126,000.
Microsoft E5 pricing may vary depending on your country, purchasing agreement, reseller, taxes, and whether you choose a plan with or without Teams. Businesses with enterprise agreements may also receive different commercial terms.
It is equally important to separate the Microsoft 365 E5 license cost from the Office 365 E5 license cost. Office 365 mainly focuses on productivity and collaboration applications. Microsoft 365 also includes Windows Enterprise, device management, identity services, and additional security capabilities.
The Microsoft E1 license cost belongs to a different comparison as well. E1 mainly suits users who work through web and mobile applications and do not need the full desktop, device management, and broader security features included with E3 and E5.
What Does Microsoft 365 E3 Include?
Microsoft 365 E3 gives employees access to the desktop, web, and mobile versions of applications such as Word, Excel, PowerPoint, Outlook, and OneNote. It also includes business email, file storage, document sharing, and collaboration services through Exchange Online, OneDrive, SharePoint, and Teams where applicable.
However, E3 offers much more than Office applications. It also includes Windows Enterprise and Microsoft Intune, which allow IT teams to manage company devices, apply security policies, deploy applications, and control access to business data.
These tools make E3 a practical base license for organizations that want to manage employees and devices through one connected Microsoft environment. It also includes identity controls and security features designed to protect users against common threats such as phishing, malware, and unauthorized access.
E3 often provides enough coverage when employees mainly need:
- Microsoft 365 applications and business email
- Teams, OneDrive, and SharePoint
- Centralized device and application management
- Standard identity and access controls
- Core security and compliance features
It also works well when the business already uses separate tools for advanced cybersecurity, reporting, telephony, or compliance.
For that reason, many organizations choose E3 as the main license for most employees and reserve E5 for roles that need its additional features.
What Extra Features Come with Microsoft 365 E5?
The higher M365 E5 license cost mainly pays for stronger capabilities in security, identity, compliance, business intelligence, and cloud calling.
These tools do not provide equal value to every employee. Their benefit depends on the type of work a person performs and the level of risk or oversight connected to that role.
More Advanced Security and Identity Protection
E5 gives security teams more ways to detect, investigate, and respond to suspicious activity across email, user accounts, devices, applications, and cloud services.
This matters because modern attacks do not always begin with an obvious virus or malicious attachment. An attacker may steal a genuine password and sign in as a real user. In that situation, basic protection may not detect the problem immediately.
Advanced identity tools can examine signals such as unusual login locations, risky user behavior, unfamiliar devices, and suspicious access attempts. Security teams can then investigate related activity instead of reviewing each alert separately.
This level of protection is most useful for businesses that manage sensitive information, support remote employees, face regular cyberattacks, or have dedicated security staff.
For lower-risk users, however, these tools may add cost without providing enough day-to-day value.
Stronger Compliance and Data Governance
Microsoft 365 E3 includes standard compliance features, but E5 adds more advanced tools for investigations, data governance, audit reviews, insider risk, and legal discovery.
These capabilities can help organizations find sensitive information, review employee activity, preserve records, investigate data movement, and manage legal or regulatory requests.
In the compliance projects we have supported, legal teams have used these capabilities to collect emails, Teams messages, and documents connected to a case or investigation. Compliance teams have also used them to trace sensitive information leaving the organization and review unusual employee activity.
E5 can support these tasks more effectively, but the license alone does not solve compliance problems. Administrators still need to set up retention rules, labels, permissions, investigation procedures, and access controls correctly.
Therefore, advanced compliance features usually make sense when the business already has clear legal, regulatory, or internal governance requirements.
Power BI Pro
Microsoft 365 E5 includes Power BI Pro, while E3 does not include a full Power BI Pro license.
Power BI Pro allows users to publish reports, share dashboards, work in collaborative workspaces, and distribute business insights to other licensed users.
This can make E5 more valuable for managers, analysts, finance teams, sales leaders, and other employees who regularly create or share reports. If many employees already need Power BI Pro, the difference between the M365 E3 price and M365 E5 pricing becomes easier to justify.
However, buying E5 for everyone only because a small reporting team needs Power BI Pro may cost more than necessary. In that case, it may be cheaper to keep most employees on E3 and purchase Power BI Pro separately for the users who actually need it.
Microsoft Teams Phone
E5 also includes Teams Phone, which allows businesses to manage calling through Microsoft Teams.
This can help organizations replace or reduce their dependence on a traditional office phone system. Employees can make and receive business calls from Teams while using the same application for meetings, messages, and internal communication.
Teams Phone does not always include every external calling service. Depending on the setup, the organization may still need a Microsoft Calling Plan, Operator Connect provider, or Direct Routing solution.
Even so, the feature can reduce the need for a separate phone platform. That makes the Microsoft E5 cost more attractive for businesses that already plan to move their telephony into Teams.
When Does Microsoft 365 E3 Make More Sense?
Microsoft 365 E3 is usually the better option when employees need a complete set of productivity, collaboration, device management, identity, and standard security tools without the advanced E5 additions.
It suits general office employees whose work mainly involves email, documents, spreadsheets, meetings, file sharing, and business applications.
E3 also makes sense when your organization already pays for separate products that cover advanced security, compliance, business intelligence, or phone services. Replacing those systems may create migration work, training costs, and disruption without delivering enough savings.
You should also consider E3 when only a small number of employees need specialist tools. Rather than paying the full M365 E5 cost for everyone, you can assign E3 widely and give E5 or individual add-ons to selected roles.
This approach keeps licensing costs under control while still giving employees the tools required for their work.
When Is Microsoft 365 E5 Worth the Higher Cost?
Microsoft 365 E5 becomes a stronger choice when several of its advanced features support real business needs.
It may be worth the extra cost when your organization:
- Handles highly sensitive or regulated information
- Needs advanced threat detection and investigation
- Requires stronger identity and access protection
- Uses Power BI Pro across a large group of employees
- Plans to run business calling through Teams
- Needs advanced auditing, eDiscovery, or insider risk tools
- Wants to replace several separate security or communication products
In these cases, comparing Microsoft E3 and E5 only by their monthly prices will not show the full picture.
A better calculation compares the M365 E3 license cost plus the price of all required add-ons against the complete E5 price. If E5 replaces several existing subscriptions, reduces administrative work, or closes an important security gap, the higher cost may be reasonable.
On the other hand, E5 is harder to justify when employees only use Office applications, email, Teams, and file storage.
Can You Use Microsoft 365 E3 and E5 Together?
You do not need to choose one license for the entire company. Microsoft 365 E3 and E5 can work together in the same organization.
A mixed licensing model often gives businesses the best balance between cost and capability.
In the licensing structures we have reviewed, businesses have kept general employees on E3 while assigning E5 to security teams, legal and compliance staff, analysts, executives, and users who need Teams Phone.
Some users may also stay on E3 and receive a separate add-on for one specific requirement. This can be more affordable when they need only one E5 feature rather than the complete package.
However, administrators must review Microsoft’s licensing rules carefully. Some security and compliance features protect or process data across several users. In those cases, every person who benefits from the feature may need the correct license.
For this reason, assigning one E5 license to an administrator does not automatically allow the business to use E5 features across all E3 users.
How Code Creators Helps You Choose the Right Microsoft 365 License
Choosing between Microsoft 365 E3 and E5 becomes easier when the decision starts with user roles instead of a company-wide feature list. Code Creators reviews how your employees use Microsoft 365, which security and compliance requirements apply to each role, and whether separate add-ons would cost more than moving selected users to E5.
This approach helps you avoid two common licensing problems: paying for E5 features that employees never use and keeping users on E3 when their work requires stronger protection, reporting, compliance, or calling capabilities. It also makes it easier to build a mixed licensing model that gives each team the right level of access without increasing costs unnecessarily.
Review your current Microsoft 365 licenses with Code Creators and identify where E3, E5, or a role-based mix will give your organization the best value.
Conclusion
Microsoft 365 E3 works well for users who mainly need productivity apps, email, collaboration, device management, identity controls, and standard security. Microsoft 365 E5 is better suited to roles that rely on advanced threat protection, deeper compliance tools, Power BI Pro, or Teams Phone. The higher price only makes sense when those features solve a real requirement or replace products you already pay for separately.
That does not mean every employee needs the same license. General office users may have everything they need with E3, while security teams, legal staff, analysts, executives, or employees who use Teams Phone may benefit from E5. Assigning licenses by role can help you avoid paying for unused features without leaving important gaps in security, reporting, or compliance.
Before making the final decision, compare the Microsoft 365 E5 license cost with the full cost of E3 plus any add-ons your teams would still need. This gives you a more accurate picture than comparing the monthly license prices alone.
Once the licensing decision is clear, we can help you assign the right licenses, configure the required services, and put the new setup in place across your Microsoft 365 environment. Contact us to get started with the right licensing and setup plan.
