Answer
Employees can have different states or statuses in Lightning Payroll. These states are 'Active', 'Inactive', 'Terminated' and 'Deleted'. These are explained in detail below.
Active: an active employee is one who is currently working and being included in pays. This is the default state when you add an employee and is indicated by the 'Active pay recipient' box for that employee being ticked in Employees >> Pay Settings >> Pay Rates. 'Active pay recipient' employees count toward your total employees number in regards to licenses.
Inactive: an inactive employee has not been terminated, but is not currently working or being included in pays. This is indicated by the 'Active pay recipient' box for that employee being unticked in Employees >> Pay Settings >> Pay Rates. Inactive pay recipient employees count toward your total employees number in regards to licenses.
Terminated: a terminated employee has been officially terminated in the program. This is done during the employee's final pay in the Edit Pay screen by pressing the Terminate Employee button. Terminated employees show up in red in the Employees list when you tick the box 'show terminated employees' above the list. Terminated employees do not count toward your total employees number in regards to licenses. Please click here for more information on terminating employees.
Deleted: A deleted employee has been completed removed from Lightning Payroll. If you delete an employee using the 'Actions' button in the Employees section, all their past and present data will be removed, which is generally never needed. Deleted employees do not count toward your total employees number in regards to licenses.
NOTE: Deleting employees is not recommended. If an employee has left your company, you should terminate them through the Pays screen instead.