How about having negotiation periods? At the end of each season a new deal is negotiated (an increased pay rate is listed) You can either choose to re-sign the staff or look for another option.
Oh, and manager could also improved their skill, of course that would cost money, but it would become more real. But the improvement shall be reaally slow, because a player improves quicker than a manager in real life.
You can do this right now. It's called buying a new staff member -- you pay money, his skill improves.