A possible approach by the boss would be to 1) see if there is flexibility to provide more within the current system (maybe Niel is more "senior" than we had recognized?), and 2) see about tweaking the formulae so everyone (or at least everyone with overlap with Niel) gets more. You may not be able to make up the whole difference, but you might not have to, and I expect very different social results than "we're paying him more to stay".

I've no particular confidence this would work well, but it seems a consistent approach that has some potential.