How to Use Sensitivity Labels to Protect Business Data

Imagine this: you send an internal email with financial projections, only to find out later it was accidentally forwarded outside the company. Or maybe a file with customer records ends up saved in a public folder. Situations like these aren’t just frustrating—they put your business at risk of compliance violations, reputational damage, and financial loss. 

That’s where Microsoft 365 Sensitivity Labels step in. They give you control over who can access, share, or even see your sensitive business information—without slowing down daily work. 

These powerful tools, part of Microsoft Purview Information Protection, help organizations classify, label, and protect data across Microsoft 365 apps like Outlook, Word, Excel, Teams, and SharePoint. 

Table of Contents 

• What Are Sensitivity Labels in Microsoft 365? 

• How Sensitivity Labels Protect Your Data 

• Best Practices for Using Sensitivity Labels 

• License Requirements 

What Are Sensitivity Labels in Microsoft 365? 

If you’ve ever wished you could put a “handle with care” sticker on a digital file, that’s essentially what sensitivity labels do. They’re part of Microsoft Purview Information Protection and help you classify, label, and protect data consistently across Microsoft 365 apps like Outlook, Word, Excel, Teams, and SharePoint. With these labels you can: 

• Encrypt emails and documents 

• Restrict access and sharing 

• Add watermarks, headers, and footers 

• Support compliance with regulations like HIPAA, GDPR, and CMMC 

Instead of employees guessing how to treat information, labels make the rules clear. For example, content marked Public can be shared freely, while anything tagged Highly Confidential is automatically restricted. 

Step 1: Create and Publish Sensitivity Labels 

Before employees can use sensitivity labels, IT admins must set them up: 

1. Access the Microsoft Purview compliance portal
2. Define label categories (e.g., Public, Confidential, Highly Confidential)
3. Configure protection settings such as:
   • Encryption, 
   • “Do Not Forward” restrictions 
   • Internal-only access
4. Publish labels via label policies so they appear in Microsoft 365 apps
5. Target policies to specific users or groups for granular control

Step 2: Apply Labels to Emails and Documents 

Once published, employees can apply sensitivity labels in their daily workflow: 

1. In Office apps, click the “Sensitivity” button on the toolbar
2. Choose the appropriate label (e.g., Confidential)
3. Labels can be applied manually or automatically based on content detection (e.g., credit card numbers, HR data) 

This ensures sensitive information is protected without disrupting productivity. 

How Sensitivity Labels Protect Your Data 

At this point, you might wonder: what difference does applying a label actually make? The answer is—quite a lot. Depending on how labels are configured, they can: 

• Encrypt content so only authorized users can access it 

• Control sharing by restricting forwarding, printing, or downloading 

• Add visual markings like watermarks or headers to signal sensitivity 

• Enforce compliance with internal policies and external regulations 

In short, labels don’t just tag your data—they actively safeguard it. 

Best Practices for Using Sensitivity Labels 

To maximize the effectiveness of sensitivity labels: 

• Use clear, intuitive label names (e.g., Public, Internal, Confidential) 

• Automate labeling where possible to reduce human error 

• Combine with Data Loss Prevention (DLP) policies for stronger protection 

• Train employees on how and when to apply labels 
  
  

License Requirements 

Like many Microsoft features, sensitivity labels have different capabilities depending on your license. The good news is that manual labeling is included with Microsoft 365 Business Premium and higher plans. If you want the extra power of automatic labeling, which detects and applies protections based on content, you’ll need a more advanced license such as Microsoft 365 E5, A5, or G5. 

Boost Your Microsoft 365 Data Security with BEMO 

Implementing sensitivity labels can transform your organization’s data security posture. If you're ready to enhance compliance and protect sensitive business information, BEMO can help. 

Our team specializes in setting up and managing Microsoft 365 Sensitivity Labels, ensuring your business stays secure, compliant, and confident in its data protection strategy.