I would handle this situation with empathy, honesty, and compassion. I would approach it in the following manner:
Meet with the HR and finance teams to understand the full picture and reasons behind the layoff before moving forward.
Plan how and when to sensitively communicate the news of the layoff with the impacted employee. Schedule time for a private, in-person meeting.
Be transparent about the organizational reasons for the layoff while expressing sincere regret that their role has been affected. Provide official notification in writing.
Give the employee a fair split package to assist their transition. Offer resources like career coaching or resume assistance.