What action should I take when an employee leaves my organization?
Should I disable or delete their user profile? What do each of these options do?
You should indeed disable their user profile. When you disable a user, he is no longer taken into account in the billing (so you won't pay for him any more). But his history in the system stays intact and you avoid “orphan” posts.
Deleting the user will remove his name from any posts he may have contributed, and therefore loose the information about the posts' author.