Microsoft annual commitment vs month-to-month subscribtions

#public

Monthly commitment is only available some SKUs, basically most of them apart from standalone plans. According to the Microsoft, this is the difference

Monthly commitment payment: You pay month to month, and you can cancel at any time.
Annual commitment payment: You sign up for a one-year subscription, but you can choose to pay month to month or pay for the entire year at the time you sign up. There is a discount for using this payment option.

Sources: Microsoft 365 Licensing – demystifying annual vs monthly commitment - Cloudrun

In microsofts subscriber agreement, https://portal.office.com/Commerce/Mosa.aspx#:~:text=(iv)-,Other Subscriptions,-. For all

(iv) Other Subscriptions. For all other Subscriptions, if you terminate a Subscription before the end of the Term, you must pay a fee equal to one-month’s Subscription fee and you will receive a refund of any portion of the Subscription fee you have paid for the remainder of the Term; provided, however, no refunds will be provided for partially unused months.

The conclusion then is that you can choose to use annual commitment with monthly billing to save money, and "only" have to pay one month as a "penalty" if cancelled early. like when a employee leaves etc.

NOTICE: I AM NOT A LAWYER AND THIS IS NOT LEGAL ADVICE