The way we're doing it (might not be the best way) is to have an active bit field, and a foreign key back to the parent record. So for general queries you would filter on active employees, but you can get the history of a single employee with their Employee ID.
declare @employees
(
PK_emID int identity(1,1),
EmployeeID int,
FirstName varchar(50),
LastName varchar(50),
Active bit,
FK_EmployeeID int
primary key(PK_emID)
)
insert into @employees
(
EmployeeID,
FirstName,
LastName,
Active,
FK_EployeeID
)
select 1, 'David', 'Engle', 1,null
union all
select 2, 'Amy', 'Edge', 0,null
union all
select 2, 'Amy','Engle',1,2