Three decisions, not one product
Microsoft uses the Copilot name for several things, and the licensing pages change often. For a business owner, it is clearer to see three separate decisions. The first is whether staff use Microsoft 365 Copilot Chat, the secure chat that comes with a work account. The second is which people get a paid Microsoft 365 Copilot licence, which lets Copilot work inside Outlook, Teams, Word, Excel and PowerPoint using your own files. The third is whether you allow agents that are billed by usage1,4,5. Microsoft is also renaming things as it goes: Microsoft 365 Copilot is now called Microsoft Copilot and Microsoft 365 Copilot Chat is now Microsoft Copilot Chat, so expect to see both names on admin pages and invoices for a while2.
Treat these as separate budget lines. A small Nelson accounting practice might switch on Copilot Chat for everyone on day one, buy paid seats for four people after a pilot, and leave metered agents off until someone has a specific job for one. That is a common and defensible pattern. Our comparison of Copilot with the other leading AI assistants covers whether Copilot is the right tool at all; this guide assumes you already run Microsoft 365 and want to buy sensibly.
What Copilot Chat gives you without a paid seat
Copilot Chat is available to people who sign in with a Microsoft Entra work account on an eligible Microsoft 365 subscription, at no extra licence cost1,4. It answers questions from the web, drafts and rewrites text, and can work with a file a person uploads or has open. Microsoft applies enterprise data protection to these prompts and responses when the person is signed in with a work account, which means they are covered by the business data protection terms and are not used to train the underlying models2.
What Copilot Chat does not do on its own is reach into your mailbox, calendar, Teams chats and SharePoint sites to answer a question such as what did we agree with the Riccarton job last week. That kind of answer depends on grounding in Microsoft Graph, and it is the main thing a paid licence adds3. Many small teams find Copilot Chat is enough for drafting, summarising pasted text and quick research, and it is the right place to build habits and a usage policy before spending money.
- Check that staff are signed in with work accounts, not personal Microsoft accounts, so enterprise data protection applies2.
- Pin Copilot Chat for users from the Copilot page in the Microsoft 365 admin center so people find the work version first11.
- Decide whether web search is allowed, and write that into your policy.
What the paid Microsoft 365 Copilot licence adds
A paid licence is an add-on to an existing Microsoft 365 plan, assigned per person4. With it, Copilot appears inside the apps people already use and can draw on everything that person is allowed to open. Microsoft's description of how grounding works is the key point for buyers: Copilot uses the signed-in person's existing permissions, so it can only surface what that person could already find, but it finds it much faster3.
In daily work, the value usually shows up in four places. Teams meetings get recaps, action items and the ability to ask what was decided. Outlook can summarise long threads and draft replies with context from earlier emails. Word and PowerPoint can draft from existing documents. Excel can analyse a table and suggest formulas and charts. Licensed users also get Researcher, a reasoning agent that works through larger, multi-step questions across your work content and the web, and Microsoft points spreadsheet-style analysis to a companion agent called Analyst13.
Check the base licence first
Copilot is only as useful as the Microsoft 365 plan underneath it. If a business of this size runs Microsoft 365, it is likely to be on Business Basic, Business Standard or Business Premium, and the paid Copilot licence can be added to each of them4. For these Business plans, Microsoft lists the add-on as Microsoft Copilot Business4. The Business plans are designed for organisations of up to 300 users, which comfortably covers a 5 to 50 person team14.
The differences between the base plans matter more than many buyers expect. Business Basic includes the web and mobile versions of the Office apps but not the installed desktop apps, so Copilot is limited to those versions for those users. Business Premium adds device management and information protection tools, including sensitivity labels, which help you keep confidential files out of Copilot answers for the wrong people2. If you handle health, legal or financial client files, the jump to Business Premium is often worth more than an extra Copilot seat.
Look at data location while you are in the admin center. Microsoft's data residency documentation explains which commitments apply to which services, and Copilot data may be stored outside New Zealand unless you buy an add-on that commits it locally6. That is a question for your privacy impact assessment, not a reason to stop. If Microsoft only stores and processes the data for you, section 11 of the Privacy Act 2020 treats it as still held by you and the principle 5 security duties apply; principle 12 matters if information is disclosed to an overseas party for its own use7.
Who should get a paid seat
The fastest way to waste money is to buy a seat for everyone because it feels fair. The fastest way to stall is to buy one seat for the owner and expect the business to change. A better test is to look at where each person's working week goes. Copilot pays back most for people who spend much of the day in meetings, long email threads, documents built from other documents, or spreadsheets they have to explain to someone else.
- Strong case: managers who run several meetings a day, account managers handling long client threads, bid and proposal writers, finance staff preparing management reports, office managers who answer the same internal questions.
- Weak case for now: staff mostly working in a line-of-business system outside Microsoft 365, such as a practice management, job management or point-of-sale tool, and field staff who rarely open Outlook on a computer.
- Copilot Chat only: people who mainly need help writing, rewording and summarising text they can paste in.
A hypothetical example: a Hamilton professional services firm
Picture a Hamilton engineering and surveying firm with about thirty staff: two directors, five project managers, a small admin team, and a group of technical staff who spend most of their time in design software and on site. The firm already runs Microsoft 365 Business Standard.
It starts by switching on Copilot Chat for everyone and running a short training session on safe use. It then buys paid seats for one director, three project managers and the office manager for a pilot. Each pilot user keeps a simple note of tasks Copilot helped with and anything it got wrong. At the end of the pilot, the firm keeps the seats that were used every week, moves one to a different project manager, and decides the technical staff are better served by Copilot Chat for now.
The firm also upgrades to Business Premium before adding more seats, because its project folders on SharePoint were shared far more widely than anyone realised. Our guide on checking permissions before a Copilot rollout explains that clean-up in detail. The point of the example is the order: habits and policy first, a small paid pilot second, wider rollout only when usage shows it is worth it.
Billing terms that catch small businesses out
Microsoft sells Copilot through its own website and through cloud solution providers, the local resellers many New Zealand businesses already use for Microsoft 365. Prices change, differ between annual and monthly commitment, and may be quoted with or without GST, so ask your provider for a written quote rather than relying on a figure from a blog or an overseas page.
Under Microsoft's current commerce rules, a seat bought on an annual term generally cannot be reduced partway through the term once the seven-day cancellation window after the seats were added has passed12. Monthly terms are more flexible but usually cost more per seat. For a pilot, that trade-off often favours a small number of monthly seats, converted to annual only once you know who uses them.
Metered agents are a separate cost. Microsoft offers pay-as-you-go billing for some agent usage in Copilot Chat, linked to an Azure subscription5. That is useful for a single well-defined agent, but set a budget alert and decide who may create agents before anyone connects billing.
- Ask for annual and monthly prices for the same seat count, in writing.
- Confirm the cancellation window and the renewal date before you buy.
- Keep Copilot seats on a separate line in your Microsoft 365 invoice so you can track them.
- Set a spending limit before turning on any metered agent billing5.
Before you buy: a short readiness checklist
Buying licences is the easy part. The work that decides whether Copilot is safe and useful happens before the seats are assigned. MBIE's responsible AI guidance for businesses encourages a proportionate, risk-based approach, starting with knowing what information you hold and what the tool will touch9. The Privacy Commissioner expects a privacy impact assessment and senior sign-off before a generative tool is used with personal information8. The NCSC recommends the same basic security controls for AI tools as for the rest of your systems, including multi-factor authentication10.
- Multi-factor authentication is on for every account that will use Copilot10.
- Staff sign in with work accounts, and personal AI accounts are covered by a written rule2.
- SharePoint sites, Teams and OneDrive links have been checked for oversharing.
- A one-page usage policy says what may and may not be put into Copilot.
- A short privacy impact assessment records the purpose, the information involved and where it is stored7,8.
- Each pilot user has a named task to try and a way to record results.