I have recently subscribed to office 365 developer site. I want to add another user to O365 to test approval workflows.
If I add another user do I need to pay for each user?
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If your user is a Office 365 subscriber in your test site, then yes. Add the user in Office 365 Admin Center.
If you share your site with an external user, who signs in with another O365 account or a Live-ID, then no. Add the user through the "Share" button in the upper right corner.
What you can do is to share with external user that are managed by an Azure AD. The user won't be able to get full coverage of all office 365 features but to create just test users I think it is might an option.
You will find more information on how to do this here: How to use external users in SharePoint Online (with a cost-free Azure Active Directory)