What word/expression describes allowing another to save face rather than to be disgraced publicly?

The word that comes to mind is 'diplomacy' but I don't believe that is quite it. It is a practice that's seems more nuanced in Asian cultures than Western. For instance, if a person is fired, rather of publicly stating the individual was fired, the person is allowed to say they wish to pursue other interests or something less harsh. It's a bit of an unwritten and unstated custom that allows the a person in a more superior social role to allow the other individual to basically save face.

Solution 1:

Tact ("the ability to deal with embarrassing situation carefully and without doing or saying anything that will annoy or upset other people") may be used. Also discretion ("the quality of being discreet or circumspect") and finesse ("skill in handling of a situation").

Solution 2:

This is called a courtesy: a general allowance despite the facts

In your example the person is being given a courtesy by being allowed to resign rather than being fired.