Can Private Pilot training, funded by employer, count as company hours? My employer would like me to get my Private Pilot License, and is funding the remainder of my training. The intention is to have me do my training on company time.

I am an engineer, and sit in the copilot seat of aircraft we test while collecting data. A commercial pilot actually flies, but for safety's sake, they would like me to have my private license while doing testing.

Could this potentially breach the commercial limitations of a Private Pilot license, as I am "technically" receiving compensation (my salary) while flying on company time? Or, as this salary is already being paid to me for my actual job duties, would the salary not be considered a contributing factor?

(For example, plan is to instead of working 40 hours/week, I would work 30 hours/week, and fly for 10/hrs/week)

If this would be a violation, would the solution to instead be to continue working 40 hour weeks, and accomplish those 10 hours outside of company time?
No law against this. Nor is there any restriction on who pays for your flight training. You are referencing something which applies to your privileges as a student pilot. You may not act as Pilot In Command (PIC) for compensation or hire, nor carry passengers or cargo for compensation or hire - see §61.89. Having an employer pay for your flight training cannot be viewed this way. Again, these regulations are only applicable to time as PIC, so, as a student, this would be only solo flight time.
Now, if the employer attempts to have you perform flight duties in the furtherance of their business while you are a student pilot, i.e. they asked you to ferry an airplane for them somewhere, or perform some other task which is not related to your flight training, that does violate the law. However, the employer only paying for you to undergo flight training is not a violation of federal law.