Helps only until a certain point and then becomes counterproductive if they don't really like the work but can't quit due to these golden handcuffs you put them in. It could even make them disgruntled, the opposite of what you wanted. Or another possibility at an extreme end, they might even consider early retirement - happened at waymo apparently.

there are diminishing returns on salary increases. you should aim to be competitive but if you raise it too high then people will stay just for the salary. their motivation changes and they can feel trapped or just start coasting.

if someone comes to you with a competing offer, you should be open to negotiation (provided they have done well in their recent perf reviews)