It's not about paying them off imo, it's about employer brand. They don't to that for them, they do it for the next hires opinions of them.

"even if your performance declines, you'll get a nice check before being let go" sounds a lot better to a candidate/employee than "not good enough? just leave. now."

it's nonsense to you because you just don't have the budget.

For a huge tech company, how much you pay people seems to matters a lot less than who's building the product. It's better to have a few amazing people that you pay way above market, than a bunch of crappy employees that you pay at market level or below.(for their level of "experience")