"Salah could go on a free - that is unacceptable. Liverpool have set the benchmark for how to do business as a football club and they've done it brilliantly," he said.
"But, they've got to get this sorted out because Mo Salah cannot leave that football club on a free."
O'Hara also spoke about Sadio Mane's transfer to Bayern Munich this summer and how the Reds could see a repeat of his situation if they don't tie Salah down to a new deal soon.
"He's going into the final year of his contract, still hasn't signed a new deal, you've seen Mane leave," he said.
"Now they recouped their money with Mane - good bit of business. He'd been at the football club, wanted to go in the end for whatever reasons, which will come out but I'm sure it was down to money."
Mo Salah on his most favourite goal he's scored for Liverpool:
Anfield Watch Verdict
It has been heavily reported that Salah wants his new deal to be worth in the region of £400k per week, double his current salary.
If Liverpool were to agree to that, then it would destroy their wage structure. Van Dijk, who is just as important as Salah, would be questioning why he isn't earning that, the same with the likes of Alisson and Trent Alexander-Arnold.
Liverpool have been successful business-wise because they don't fold over and give in to pressure. If they were to give Salah this ridiculous amount of money, then it opens the door for everyone else to ask for a similar wage.
I'm not saying Salah doesn't deserve £400k per week, but Liverpool can't give him that much, unfortunately.