Currently, there's no option to set or delete the deceased employee in QuickBooks Online. I suggest choosing the options provided or mark an employee as a leaver. This way, the employee is no longer with your business and is not visible when you are creating payslips. Employees with this status are found in your employee's list.
Here's how:
Go to the Employees or Payroll menu.
Select the name of the employee to open the profile.
Click the Actions buttonand select Mark as leaver under the employee name.
Enter the employee's leaving date and the employee's reason for leaving.