What's a tactful, respectful way to notify job applicants that you won't be hiring them? I see a lot of angry online discussion of this issue. Nobody seems to like the common "if you don't hear back, you're not hired" approach, but it's easy to go wrong in other ways (too short, too long, too condescending, too cheerful, too early in the hiring season so it seems insulting, too late so it's no longer useful, etc.). Of course, part of the problem is that being rejected is intrinsically painful, so nobody's ever going to enjoy a rejection letter. The question is how to provide useful and timely information while avoiding adding unnecessary pain.
Just from a perspective of one who has been rejected a lot of times (although from schools and research programmer, then as an undergraduate), fast and informative feedback is the most important.
For me there is little difference between hearing "the competition was very high" and "get out". Saying that "there was only one place" when if fact you don't want to hire someone is very short sighted. It may make the decision smoother, but in a long run it will create false impressions and hopes; and, in fact, such approach makes it impossible to say that actually you want to hire someone, but you run out of positions (see How to show interest in a candidate when no positions are available?).
- waiting long is bad both psychologically and for practical reasons (i.e. other plans); I don't see a reason for not rejecting as soon as you are sure,
- it is important to distinguish if you don't want someone now or at all,
- any feedback is of great value;
otherwise one gets no idea what was wrong, if it makes sense to apply again and how to improve; I would love to hear "there were 5 places but only 1 funding for someone with your status; I had expected someone with stronger skills in X and Y (but your Z is more than fine)".
In addition to Piotr's answer, I would add that it also depends on the profile of the applicant. For instance, if the applicant does not have a CV that matches exactly the ad, then there is nothing wrong to answer with a succinct "Sorry, your profile is not what we are looking for": the applicant took a chance, to see if a different profile could be of interest, sometimes it is, sometimes it isn't, and there is no shame in "failing" in this case.
However, if the profile matches, but is too weak, then it could be helpful to point out if the applicant is good, but there was a better one (in which case it might be worth to keep in touch in case the stronger applicant decline the offer, or leaves for any reason after a few months), or if the applicant is just not good enough (for instance, not enough publications, not enough publication in top conf/journals, not enough external collaborations, not enough teaching experience, not enough grant applications, etc). I guess it's worth doing so at least for short-listed applicants, who took the time to come for an interview, and maybe a public talk, and that can help them understanding what points they need to focus on in the future, especially for the youngest applicants.
That being said, I also know that some recruiter can be reluctant to give detail as to why they didn't recruit an applicant because they are afraid that it could provide means to the applicant to official contest the recruiting process, and maybe sue the university. In this case, I would suggest to say this kind of things by telephone, i.e. without leaving a written trace.