Easiest would be to output absolute URLs in all cases. (/test.php)
If you want to leave the possibility to run your site in a subfolder, you can prepend all paths with a variable. This can be changed to the current position of your site.
Another way is to add a
<base href="http://www.example.org/subfolder/" />
to your html code and change that accordingly in combination with absolute URLs. All URLs are based on what you put into the attribute. This is a very elegant solution, but it affects a lot, which might be surprising if one is not that trained in web linkage.
I think there is no "right" way. Typo3 uses the base tag variant and it's most likely the way I would use. Lots of other software use the variable variant (or wrap the path in a function -- which is just another way of achieving the same). Just try some ways and decide for the one which seems most appealing to you I'd say.
In my experience the only thing nearly nobody uses are relative URLs.
Update
Use this html in combination with base html tag.
<ul>
<li<?php if ($page == 'home') echo ' class="active' ?>><a href="index.php">Home</a></li>
<li<?php if ($page == 'contact') echo ' class="active' ?>><a href="pages/contact.php">Contact Us</a></li>
<li<?php if ($page == 'services') echo ' class="active' ?>><a href="pages/services.php">Services</a></li>
<li<?php if ($page == 'employees') echo ' class="active' ?>><a href="pages/employees.php">Employees</a></li>
<li<?php if ($page == 'dashboard') echo ' class="active' ?>><a href="pages/dashboard.php">Dashboard</a></li>
</ul>