If this is the first time you've fired someone, consult an HR firm to make sure your legal bases are covered. Legal fees + insurance policy rate hikes are exist

If this is the first time you've fired someone, consult an HR firm to make sure your legal bases are covered. Legal fees + insurance policy rate hikes are existential threats to your runway. You're probably over-valuing the (non-liquid) options, since that's part of being a Founder. If your equity is worth real money someday, you'll have the opportunity to buy back the shares (or introduce your ex-employee to an investor interested in purchasing). This is a win/win for early employees who tend to value liquidity. Part on amicable terms so this isn't an awkward conversation in two years.