This depends on the job. If other people can do their job without one who has been fired then it's quite cheap. On the other hand, in software industry, there are often teams of specialist with different expertise and their jobs depend on one another. In such a case, firing one will interfere with every one else and you will take a loss in decreased productivity for everyone. E.g. you fire a member of a 5 people team on a project with 100 people total. So that team productivity drops 10% (it was a bad hire after all so there is not much loss) and, hence, the whole project slows by 10%. Now you pay the remaining 99 people 10% more to get the same work done.