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I suppose the reasons for management’s decision to terminate him is valid and now whimsical, e.g., he is incompetent or his position is redundant or that there is an urgent need to trim down personnel, etc. If so, you just have to say it the way it is. Cut and cut cleanly. There’s just no way that the manager can get away from the “guilt” of telling the guy that he’s terminated. But that’s life. And that’s a job every manager should be ready to do at least once in his lifetime (most likely, several times).
On your question of what to offer the employee. The question is: does he deserve it? If yes, then consider giving him a better severance pay than what your company policy says. Or if he’s just dumb but his wife isn’t, then you may consider hiring the wife as replacement, instead. Or hire any of his children if there’s an opening within the company.
Hope these ideas help