Retention Policies in Office 365 Explained in Simple Words

Retention policies in Office 365 are a built-in solution of the Microsoft 365 cloud that controls how long data stays and when it gets deleted. Using such tools becomes necessary as every day organizations deal with a humongous amount of information. It’s not just the volume of data but the fact that there are so many different sources (Outlook, Teams, SharePoint, etc.) in the O365 cloud that data becomes viscous and manual management is downright impossible.

That’s why it becomes extremely important that admins know exactly what the retention policies are, when and why to use them. We will cover all that, plus tell you the exact steps you can use to apply your custom retention and develop Office 365 backup policy techniques as well. Let’s start.

What are Retention Policies in Office 365? Are They Different from Labels?

Retention policies are rules that determine how long data is kept in Office 365. They are a key feature within the Microsoft Purview portal and help an organization to manage the vast amounts of data that is in the O365 cloud at the container level.

If you don’t know exactly what a container means in Microsoft, think of it as a storage unit. It houses (or contains) other data elements. Like for example, a user’s mailbox is the container for individual email items.

The majority, if not all, of the applications that you use in M365 are containers for various data elements. Outlook is for mail; Teams is for chats.

Policies are designed to perform one of two actions

• Retention: Makes data immune to deletion.
• Deletion: Permanently removes all traces of data.

Then there is a hybrid of the two core policies. Here, you retain the data for a preset interval and then, at the end of its lifespan, delete it automatically with zero admin intervention.

Labels work similarly, except they apply to individual items (for example, an email in Outlook Inbox or a document in OneDrive).

So labels are a more precise version of policies and have the following features that are absent from retention policies in Office 365.

Specify the retention solution from the moment the label was applied. This facility is given on top of the usual age/last modification time type filter.

Use machine learning to figure out what item is being labeled.

Have default labels for certain apps, like SharePoint.

You can get a more in-depth look from Microsoft’s comparison between labels and policies.

Now, let us see the reason behind using the retention

Why Use Retention Policies in Office 365?

Compliance protocols and industry regulations mandate the use of such data governance tools.

Like the Sarbanes–Oxley Act of 2002

Risk of internal leaks increases exponentially if an organization doesn’t know where its data is.

According to a recent Eon report (2025), which surveyed 150+ organizations, almost half of them struggle to find the right data when they need it.

You can thwart external attacks by automating the deletion of data that has served its purpose.

Your peers and competitors are using these right now and becoming leaner and faster.

It reduces user burden and only allows them access to what’s necessary, and ignores the rest.

Let us learn to make and use labels first, then move on to the retention policy.

Create and Apply Microsoft 365 Retention Labels

Here is the list of prerequisites you must fulfill before you start.

• Your organization must be on the Microsoft 365 E3 or E5 enterprise plan
• You must have the Global Administrator or Compliance Administrator privileges.

How Admins Make a Retention Label in Microsoft 365

Step 1. Open Microsoft Purview >> Solutions >> Click on the Data Lifecycle Management option >> select Retention labels.

Step 2. Click on Create a label.

Step 3. A Create Retention Label window opens on the screen. Enter a Name (mandatory) and Description (optional but recommended)

Step 4. Choose one option out of three in the Define label settings page.

Step 5. Decide how long to retain the items for and the start period.

Step 6. Determine what happens after the retention period expires (you have five options).

Step 7. Finally, on the Review and finish page, see if all the settings are as per your requirement, then hit Create label.

Guide to Create a Microsoft 365 Retention Policy

Step 1. Log in to Microsoft Purview >> Select Solutions >> Tap on Data Lifecycle Management >> Go to Retention policies.

Step 2. Tap + New retention policy and add a name and description.

Step 3. Continue with the default Full directory selection on the Assign admin units screen and press Next.

Step 4. Choose an adaptive/static scope for this new retention policy in Office 365.

Step 5. If you chose Adaptive in the previous step, click on Add scopes and select one or more adaptive scopes. Then, select one or more locations. The locations depend on the scope.

If you opt for Static. In the Locations page, select the locations to be included in the retention policy.

Step 6. Depending on what your organization requires, you can:

•    Retain the content for a specific period or forever (does not delete)
•    Retain for a duration and then delete.
•    Delete the content after some time. (does not retain, data may be removed before)

Step 7. Check the details on the review screen and hit Submit.

Limits of Retention Policies in Office 365 and What’s the Alternative?

The biggest limitation of retention policies is that the data is still on the cloud. To access and interact with the data, you need an active internet connection.

Also Read: Outlook Classic End of Life Date, Meaning & Next Steps

Retention policies are only made available to the most premium enterprise-grade E3 and E5 plans. Making it out of reach for organizations that have a lower budget.

Setting up a calendar retention policy is quite difficult and may not be possible in some cases (like perpetual, never-ending events).

If a user deletes an item from their account, the data stays in litigation hold, but restoration of the data to the user account is not possible without admin intervention.

Download, although possible, requires a completely different set of steps than what we have described here. Moreover, it will be more like a trial-and-error method than a true and precise data export. It will take a lot of effort and waste a lot of time to get the exact data you need.

Instead, what you can do is use the SysTools Office 365 Backup and Restore software to get a copy of the Office 365 user data. It can download every user’s email, contact, calendar, and document data from the cloud onto a local machine directly without the requirement of a network folder setup.

This zero-code GUI-only tool requires no special training to operate. Just follow these simple steps.

• Step 1. Install the tool. Select Microsoft 365 as the source and keep the default destination format. Scroll down and mark all the workloads and apply the date filter if you wish.
• Step 2. Validate the Office 365 admin credentials.
• Step 3. Validate the local folder path.
• Step 4. Map the Users
• Step 5. Preview, Validate, and Start Backup.

Conclusion

In this write-up, we went in-depth on the topic of retention policies in Office 365. Organizations must use them if they wish to maintain a proactive approach towards data safety. Although necessary, the retention policies are not a true backup and restoration substitute. That is why we have introduced a complementary tool that can patch up the gaps left by retention policies and labels to make it super easy for admins to back up and restore their organization’s data.