If an employee no longer works for me, do they still count toward the total employees that I would be paying for?

No. When an employee no longer works for you, you can either deactivate them (which preserves all their data) or delete them from the system. Either way, they will no longer count toward your billing. If you deactivate an employee, you can still access their data and even reactivate them later, but you will not be charged while they are inactive.

You can refer to this article for step-by-step instructions on how to deactivate or delete a user:

Deactivating or Deleting a User in the Console