While at-will seems like firing quickly is common, it's really not. In a large company there are often (not always) many HR hoops to go through in order to fire. Often these have to do with legal processes. For example, an employee might have developed alcoholism. A company cannot legal dismiss the employee if the employee is willing to go to rehab. They can fire a contractor/consultant (provided the contract allows for that).

It also has to do with morale. If Jim just disappears and he's a FTE, that makes people nervous. They might start looking at a different positions. If Sally the consultant is gone tomorrow, oh well. There is often an "us" v "them" relationship between FTEs and consultants. It's not necessarily antagonistic, but it's not as amicable as FTE to FTE.

I don't think you understand what at-will means. They can fire the employee for no reason at all, alcoholism or not.

IANAL, (nor am I the OP,) but my understanding is:

You can do X for no reason != You can do X for any reason

i.e. they can fire you when they wish to, but if you can demonstrate that the reason for firing was illegal, then it the firing is not for "no reason", but for an "illegal reason."

Can't they just fire the alcoholic because they don't like his tie, then? Or, say, assign him an impossible project and then fire him for not completing it?

They can. At will means they don't have to provide a reason. It gets complex though when the fired employee claims he was actually fired for illegal reasons. E.g. they might claim they were fired because of their age, because they were a woman, etc. Since most companies like to avoid lawsuits (but win the lawsuits if they do happen) they typically have internal HR processes that make it much harder to fire people. These require managers to document everything so that when person X claims they were fired because of their age, the company can hit back with "no, actually we have this whole file documenting all the instances in which you screwed up".

> Or, say, assign him an impossible project and then fire him for not completing it?

What you're trying is in UK parlance called "constructive dismissal" and it's not good; many jurisdictions make this risky.

https://en.wikipedia.org/wiki/Constructive_dismissal

It's not free to terminate an employee in the US. The (former) employer pays for the cost of unemployment claims. A company like Twitter will likely also pay severance, because it makes them considerably less attractive to future hires if they don't, and also because it can be cheaper than dealing with a potential lawsuit from a terminated employee.

In the USA, or at least in California, the employer does not pay the unployement benefits to the former employee. The benefits are paid by the state, which in California is http://edd.ca.gov. The employer pays for unemployment insurance. If the employer has relatively few former employees filing for unemployment, that insurance rate may go down over time. The concern over covering the costs of unemployment benefits are related to a possible increase in unemployment insurance premiums.

Source: http://www.calrest.org/tips-for-protecting-your-unemployment...

Yes, in the US most corporations pay unemployment tax (apparently nonprofits and government agencies can get a special reimbursement deal where they pay directly for unemployment costs). As you noted, unemployment taxes increase for corporations with lots of former employees claiming benefits. The fact that it's not direct doesn't eliminate the cost.