While you can't actually Delete Users from UCM (to preserve historical data), you can remove them from sight on the Manage User Grid and from any User drop-down in the system.

From a Users Profile Page, mark them Inactive at the bottom of their profile (1).

As an added security measure, you can make the "Inactive" user a No-Login User (2). This will ensure that even if another Admin, either now or in the future, ever makes that User Active again by mistake, that User will still not be able to login, since their User Type won't allow it.

When you go back to the Manage User Grid, at the top, there is a checkbox that says Only Show Active Users you can select this to make any deactivated users hidden, cleaning up your grid. (If you made the user No Log-in you can deselect Show No-Login Users as well)

Deactivated or No Log-in users don't count towards your User Licenses and shouldn't show up as an option in any of the User Selection areas. They can't log in, or be assigned to contracts or workflows, they can't touch anything or even see anything in your system!