This strategy can be sub-optimal from the employer's perspective.

Consider yourself as an employer and assume your employees have perceived switching cost C > 0.

Your employee will approach you with bids b_1, ..., b_n all of which are substantially larger than C. So to keep your employee you will need to pay C plus some premium. In fact, not just any premium, but probably something close to max(b_1, ..., b_n).

If you can make good guesses at C and b_1..b_n, then you can retain employees by ensuring you're always giving raises between C and max(b_1, ..., b_n).

And all of that assumes that employees are fungible at any particular price point. They're not; employers also have switching costs. Among two otherwise equivalent employees you'd much prefer the one you already have.