> At the engineering departments of most large tech companies including Microsoft, people at the same pay grade are supposed to be making about the same amount of money. The idea is that if you deserve a raise, you deserve a promotion too. So your job title and your salary aren’t like two different things.

This is not true. At FAANG companies and Microsoft, the total compensation bands for levels at or above "Senior SWE", "Senior SDE" are really wide. This is by design, and its widely communicated that this is the case. Most of the variation is in equity grants and bonus, rather than salary - if your management chain recognizes that you made a huge impact last year, you'll probably get huge equity refreshes and a giant bonus, although your salary might not rise by much.

Promotions are a separate thing, because promotion beyond "Senior" implies a change to your role and expectations (more leadership, more "people coordination" even if you're not a people manager, etc.) It's totally possible that you're making an amazing impact in your current role in a way that merits additional compensation, but you're not meeting all the criteria for the next step on the ladder. That's fine - you're still going to get paid a huge amount more than the average for your level.