If your company is having that discussion in the context of full time employment, the indirect costs (i.e. non-salary things like health insurance, 401(k) match

If your company is having that discussion in the context of full time employment, the indirect costs (i.e. non-salary things like health insurance, 401(k) matching, etc) are a significant factor in the equation. As salary drops, these (relatively fixed) indirect costs become a larger percentage of the cost of retaining someone. If you measure the value of the employee by the salary you pay him or her, the ratio of total costs incurred by the company to value derived by the company for this one employee increases as that employee's salary drops. This is one of the major reasons that temporary jobs and part time work have become popular solutions to this problem: the indirect costs associated with these types of hires are lower. What we really need, in an ideal world, is a set of personal benefit programs (health & life insurance are the big ones) which are completely uncorrelated with your employment status or location. Forcing employers to shoulder the burden for personal benefits leads down a dark and dysfunctional path where the programs are not controlled and managed by those who have an interest in them for what they provide, but by those who have an interest in minimizing the costs of such programs.