If an employee leaves the company we need a way to find all the places that person has been granted permission in SharePoint. And then of course we would need to remove those permissions or if they are a site owner, change the owner to another employee.
Has anybody done this or have an idea where to start?
I'm not super familiar with how SharePoint permissions work, but it is probably a best practice to not give any one employee direct access to anything and to use AD Security Groups. When they leave the company, you can remove their profile and name from all AD Security Groups and not worry about access to anything including SharePoint.
I do know that you can view the SharePoint site permissions, but nested SharePoint sites can create more hassle.
This link may be useful... VBDotNetHeaven - Checking User Permissions in SharePoint Sites
We use Sharepoint Access Checker Web Part to check which sites a user has been granted permissions.
I recently put together a web part to do this - basically, each SPList in each SPWeb on your site has a collection of SPRoleAssignment objects, which define the permissions for that object. Within the SPRoleAssignment, there is a collection of Member objects, from which you can get the name of the user or group that has been assigned permission to this object. This allows you to get the permissions even if the list or folder is not inheriting from a parent. The Access Checker Web Part mentioned earlier does this, but it does not look at sub-folders, which may have their own permissions.
The bottom line is that if you have given users explicit permission to distinct folders, you will need to either build a solution to give you a run-down of the permissions, or click through every folder separately. There is no built-in functionality to display this quickly and simply.
I manage our sharepoint site and use Active Directory to handle all the security. I would recommend if you don't do that now to try to move to that type of security model.