Honesty does not give alowance to crelty. If honesty is to be obtained, you can't have people with cruelty spewing out their mouths like water off of waterfalls, going around inhibiting others from being honest by causing them emotional pain. It doesn't work very well.
What should be done is, form an opinion and then speak your opinion in a more comforting way. For example, "You're not shit for this job, you're fired!" could be more comforting. "I'm sorry, you simply aren't working up to par, you have to either put more effort into your work, or you will be laid off." I think that the main reason that people tend to be cruel when being honest is laziness. Laziness to use more words to add morale instead of just the quickest words that come to mind. Or undervocacbularial abilities.