To hire a new employee at market rate, you have to give your team of lets say 10 employees that much money, which is euqivalent to hiring another 2 people for 'nothing'.
This can then immediately poison the water source so to speak for the rest of the team which now realises how they are getting screwed over and/or start realising the nature of the relationship between them and the employer.
They then start accepting offers elsewhere, and one by one the team is no more, with no one available to take care of the product. This in the end has a huge financial impact on the company, which is much greater than the salary they saved by not adjusting those ten employees.
I have experienced two situations like this in my career. The whole team, or close to it, was wiped out with no one knowing how to take care of the software product (in one case the team had been developing and supporting 10x mobile apps). A month after leaving, as I was the last to go, I was contacted by my former manager and asked if I would be willing to come help them out with the mobile product that I had been the lead on, since the new fresh out of college graduates they had replaced us with were having issues.
I charged them a fine hourly amount for a minimum of one day, came in and fixed the issue within 20 minute.
Those fresh grads didn't know the products, the codebase, the tooling nor the space that the products were in. And within two years, all of them had jumped ship for new employment.
But it's even worse than losing the salary though, because you can often find some money somewhere to replace that cost. You CANNOT do that with time, ever.