Concern regarding auto_increment in MySQL InnoDB
Don't delete records for which there is a logical collation that you want to keep. Rather than marking deleting employees, mark them as terminated, keeping the row there. Otherwise you'll have an audit record without knowing who it corresponds too.

Option b), for an Audit record, denormalize it, if necessary create a shadow table for the employee. The audit should reflect the employee record at the time it occurred.

No, you shouldn't use MyISAM.

MySQL-8.0 changes behaviour as its manual states (the primary source you should consider for important decisions). If in doubt, test it.