The reason is threefold: morale, liability, and inability to use the worker for any long-term planning. Having a person who knows they will be fired roaming th

The reason is threefold: morale, liability, and inability to use the worker for any long-term planning. Having a person who knows they will be fired roaming the halls, poorly motivated is an obvious risk for the morale of the remaining employees. And it just drags out the pain of separation, even if the separation is otherwise amicable. Second, there is some risk, no matter how generous the severance package, that the employee will become disgruntled and desire to harm the company. Even if it's a 1 in 1000 chance, the damage that a disgruntled insider can wreak is enormous. Huge downside, very little upside. Finally, if they stay, they are now effectively temps. They can't be used in anything but short-term work because you don't know when they'll get the magic offer and be out the door. A good severance package (say 2 months of salary, plenty of buffer to find a new job) costs just as much as keeping them on for two months after a warning, but has none of the downside risk. The only thing you lose by doing this is the very marginal short-term work you could allocate to them in the interim, which they would be poorly motivated to execute to the top of their ability.