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Firing people really sucks.
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1Can you reduce the impact somehow? What is the part that sucks most: is it a personal confrontation you'd rather avoid, or knowing that you made the other person's future more difficult financially? If the latter, I can imagine some preparation to reduce the impact, for example make a mandatory savings account for everyone where you will put 5% of their salary, and then give them all of it at the end -- not sure whether something like this is legal, but approximately in that direction.