If you say the company is going to retrench, the employee got the right to ask for compensation.
If you giving reason of poor performance, normally it won't lead to termination.
So, which choice also not a very good choice.
Instead of terminate the staff, try to do a DI so the employer can know the reason of the poor performance. The employee also can have a chance to defend him/her self.
In future if really the staff can't performance, then the employer also got reason to terminate the staff since DI already been done.
BUT, if you company really want to terminate the staff, then the right procedure is giving a period of time written notice to the employee stated the termination of contract/service.