How does Europe handle it?
The going rate for firing without cause is about 1/3rd of a month of salary per year of employment for an employee under 55 (?) on a permanent contract. On a yearly contract this is difficult - I would recommend hiring on permanent contracts because they are even seen as a positive.
Demoting will mean that you overpay someone, but will at least clarify the new hierarchy to the team.
I guess it’s the same amount of time in other countries.
Second thing is: most of our countries have a more direct conversation style.
As a full-time employee of the company you're working for (i.e. not simply contracted in), you still have an employment contract (it's a right/required) which'll lay out the employment expectations (salary, hours per week, whether you can be required to work additional hours etc).
We do also have contractors - i.e. those who work for an external company who are brought in for a specific project (or to provide easy-to-get-rid-of headcount).
In my experience, working as a contractor isn't all that much more common than in the US. But people having some form of contract is, because basically all employees have one.
When I was in France it was quite jarring and imo, it seems like it would be more stressful than at will employment as it's basically a yearly stress (as opposed to stress only when the economy is bad for example). But I think some European countries have some protections for contractors too, I just don't know if those apply to when your contract just doesn't get renewed.