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Automatic license management is recommended unless you have a
specific reason to choose manual license management.
With automatic license management, you automatically purchase a Zulip license for each user in your organization at the start of each billing period (month or year), and whenever you need additional licenses.
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Deactivating a user frees up their license for reuse. No refunds are given for unused licenses you have purchased for the current billing period. For example if you start an annual billing period with 10 users, and deactivate 4 users halfway through the year, then you will receive no refund, even if those licenses are not used in the remaining 6 months of the year.
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If you have no free licenses when a new user joins or an existing user is reactivated, you will be automatically billed for an additional license. You will be charged only for the remaining part of the billing period. For example, if you are on a $8/user/month monthly plan, you will be billed $4 for a user added halfway through the month.
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If you have an annual billing period, each month, you will see a single charge for all licenses added the previous month. If you have a monthly billing period, the charge for licenses added during the previous month will be combined with your monthly renewal charge.