If our team grows briefly large (e.g. for a project) - where we need to create > 25 users, then shrinks down after the project, then can we vary our JIRA level from one month to the next, so that we are not paying for users who don't log in anymore.
If this is possible, will issues / notes / content created by these legacy users still be available for the rest of the team to review / change / use / etc?
You can either delete the users or disable their access to the application. The Application won't let you delete the user if it has participated in any issue by creating it, commenting on it or being assigned to it.
Once the user has been disabled it won't consume your licenses and all the information will still be ther for the rest of the team.
About your question about changing the number of licenses from month to month I believe you should better ask Atlassian support.
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