There can be a lot of confusion about what "fired" means. Most US states have "employment at will," meaning that there is no implied contract, and an employee can be terminated without giving a cause. Yet in the common parlance, "fired" means "terminated with cause." If an employee has been terminated with cause, they know it.

Also, companies avoid the term "layoff" because it could imply that an employee is entitled to be re-hired if business conditions improve. This can be the case in union shops. The term I've heard for a permanent termination without cause is "reduction of force."

Companies have to be careful about using "with cause" because they can get sued over it unless they absolutely have all of their ducks in a row. They will often pay the severance rather than expose themselves to a lawsuit and discovery process. They may also wait until there's a downturn, and get rid of the low performers all at once.

Of course like you say, if there's a contract, it can say anything.