Mostly it gives them the ability to effectively cut the pay of those whose performance they don't value, by giving them increases smaller than inflation.
Most FAANGs will just nuke them from orbit instead of trying to coax them out with a 3% raise instead of a 6% raise. Google may be an exception, I don't know, but you're not going to last long as a 'low performer' at Amazon (as today's LinkedIn post will attest) or Meta or Apple. They'll just tell you to pack your shit.
Google is famously slow at firing people. I’ve seen low performers scrape by for 18 months because managers were conflict averse and didn’t want to do anything.