It's circumstantial really. If your a small company than hiring and firing makes a lot of sense. Plus you don't have a lot of assets so you are a small target. Big companies on the other hand don't have that luxury. You don't get fired individually at a large company they wait until layoffs.

Reason is that if a person is fired than you are a huge, rich target for a lawsuit. Each and every one of your employees is now a liability. Someone say an off-color joke or do something that can be even remotely considered discriminatory and you're on the hook. I've had colleagues get rightly fired for doing incredibly stupid things. They lawyer up and bring a suit about some manager being racist, sexist, or religious insensitivity. They know the company would rather pay a few thousand dollars than have to pay $500/hr for a lawyer.

If your company is viewed as discriminatory towards employees (doesn't matter what the facts are) you'll be paying more money to recover your reputation. So severance and settlements are much cheaper to the bottom line then trying to convince people of your story.