I think the simple way would be to just ask for a raise to market levels or in lieu of more pay you would take additional privileges such as being able to set your own hours.
The chances are that if he does move to somewhere else he will have to do the full 8 hours a day but his pay will be commensurate with that. Again, this could be explained like that rather than 'you pay badly'.
So it may work if the manager 'sees' him as only hired for a four day week. He can then make the case for paying him for five days a week in order to achieve certain objectives, e.g. meet deadlines.