Even in European countries with strong employee rights, the typical contract is allowed to have a 3 month or so "probation period" during which either party can

Even in European countries with strong employee rights, the typical contract is allowed to have a 3 month or so "probation period" during which either party can terminate at short notice. I guess this is one of the situations that clause is meant for. Once you take into account not only the net negative you're getting from your recent hire, but the effect on other employees too, the rational decision is to let them go. Think of it this way: intrinsic motivation and good climate for everyone else means not having someone higher paid but clearly less competent on the team.