How to Remove Licenses From Disabled Accounts with PowerShell

The Reasons for Disabled Accounts

Many reasons exist why organizations disable user accounts, including when employees go on sabbaticals, take time off due to illness, or have leave following childbirth. A less innocuous explanation is when employees are suspended for some reason. In all cases, accounts might remain in a disabled state for long periods.

Disabling an account means that Entra ID won’t let the user sign into their account. Data remains online and accessible for corporate purposes such as eDiscovery. Here’s how to disable an account using the Update-MgUser cmdlet from the Microsoft Graph PowerShell SDK:

Update-MgUser -UserId -AccountEnabled:$False

When the user returns, run Update-MgUser again to restore access by setting the AccountEnabled property to $True. To find the set of disabled accounts, run the Get-MgUser cmdlet like this:

Get-MgUser -Filter "accountEnabled eq false" -Property AccountEnabled, Id, DisplayName -All

Licensing of Disabled Accounts

Because accounts might be disabled for a long time, thoughts turn to the monthly license charges levied by Microsoft. If someone’s away for six months, should the organization pay for six months’ of charges. If the account has a Microsoft 365 E3 license and perhaps an add-on license (like SharePoint-Syntex advanced management) and a Teams calling plan, the costs could mount to $300 or thereabouts while the user is away.

One or two accounts incurring charges without use might not be a big deal. Interest about controlling license costs mounts as the number of disabled accounts mount. Twenty disabled accounts means $6,000 over six months. At that point, it might be worthwhile taking action to remove licenses from disabled accounts until their owners return to work.

Removing Exchange Online Licenses Leads to Disabled Mailboxes

Before rushing to remove all licenses from disabled accounts, let me sound a note of caution about removing products that include Exchange Online. An Exchange Online service plan is included in many Office 365 and Microsoft 365 products. For instance, Exchange Online Plan 2 (necessary for option such as archive mailboxes) is part of the Office 365 E3 and Office 365 E5 products. If you remove disable the Exchange Online service plan or remove the license for a product that includes Exchange Online from an account, the mailbox goes into a disabled state. One way to find mailboxes without licenses is to use the Get-EXOMailbox cmdlet to check if mailboxes have a valid SKU (product license):

Get-EXOMailbox -Filter {SkuAssigned -eq $True} | Format-Table DisplayName, UserPrincipalName, ExternalDirectoryObjectId

Exchange Online permanently removes disabled mailboxes after 30 days. To move from the disabled state, the owner’s account must be assigned a license that includes an Exchange Online service plan.

When removing licenses from disabled accounts, it’s important to check for Exchange Online to make sure that a removal doesn’t lead to potential data loss. Two options are available:

  • Retain assigned licenses that include Exchange Online for disabled accounts.
  • Replace the assigned license with a lower-cost license that includes Exchange Online. For example, you could assign inexpensive Office 365 E1 or F3 licenses to keep account mailboxes in a healthy state.

Exchange Online supports license stacking, meaning that it’s possible to assign multiple licenses to accounts that include an Exchange Online service plan. When this happens, Exchange Online uses the most functional plan.

Scripting License Removal

This article covers the basics of license management with the Microsoft Graph PowerShell SDK. The outline of a script to find and remove licenses from disabled accounts might include the following steps:

  • Connect to the Graph.
  • Define exclusions for licenses that should not be removed from accounts (those with Exchange Online).
  • Find disabled accounts.
  • Loop through each account to examine the assigned licenses and decide if any can be removed.
  • Run the Set-MgUserLicense cmdlet to remove the licenses.
  • Report the actions taken.

If an organization uses group-based licensing, Set-MgUserLicense cannot remove licenses assigned using this mechanism. Instead, the correct approach is to remove the account from the group used by Entra ID to control license assignments.

My version of a script to process license removals for disabled accounts can be downloaded from GitHub. It includes code to exclude licenses containing Exchange Online service plans. As mentioned earlier, the alternative is to replace licenses with a cheaper version. The code to do this would be simple to add. The script excludes licenses assigned through group-based licenses. Again, it would be easy to add code to remove accounts from the groups used to assign licenses. Figure 1 shows the script in action.

Removing licenses from disabled accounts
Figure 1: Removing licenses from disabled accounts

The Shared Mailbox Approach

Another way to handle the question of what to do with mailboxes belonging to long-term absentees is to turn them into shared mailboxes for the duration of their owner’s absence. When the owner returns, revert the shared mailbox to make it a regular mailbox again. This technique preserves the mailbox because shared mailboxes don’t need licenses. Here’s what you do:

  1. Convert the mailbox into a shared mailbox.
  2. Disable the account and change the password.
  3. Remove all licenses.
  4. (Optional) Hide the shared mailbox from Exchange address lists.
  5. (Optional) Remove the shared mailbox from distribution lists so that mail doesn’t pile up in the mailbox during the owner’s absence.

When the user returns:

  1. Convert the shared mailbox to a regular mailbox.
  2. Enable the account and assign a new password.
  3. Assign licenses to the account.
  4. Unhide (if necessary) the mailbox.
  5. Restore distribution list membership.

Check and Verify Before Use

Remember that the script illustrates the principles behind license removal for disabled accounts. It is not a production-ready solution. Like any code downloaded from the internet, you should verify and test the script and adapt it to meet your needs (especially because it removes licenses from accounts). The nice thing is that everything’s done in PowerShell, so please go ahead and modify the code as you wish.

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