For permanent employees, there's severance payment when firing someone. The amount depends on how long the employee has been in the company, as well as when the contract was signed (the legislation has changed and doesn't apply retroactively). This means paying the dismissed employee something between 12 to 30 days wages per each full year of service. Bear in mind that the value is capped via multiple factors, e.g. it can't be bigger than X times the minimum wage, it can't be bigger than Y times the monthly wage.
However, most contracts are fixed-term: for those, the company simply has to inform the employee that they don't intend to renew. There are also many, many people illegally hired as independent contractors, but working full-time on company premises; those are "fire at will".
There are alternatives [1], however:
* A collective dismissal procedure;
* Dismissal due to the termination of a job position;
* Dismissal due to the employee's incapability to adapt.
[1] http://us.practicallaw.com/6-503-4030?source=relatedcontent#...