Everyone you invite counts as a paid user, whatever their role. That includes admins and managers, even if they don't track their own time.
When you pay
On a paid plan, you pay for a seat when you invite someone. The invite email goes out once the payment is done. Seats you add are charged pro rata.
To stop paying for someone
Deactivate them. Their seat is freed straight away, and your bill goes down at your next renewal. See How do I deactivate or reactivate a member?.
Switching off someone's time tracking doesn't change what you pay.
Free covers up to 2 users.
