The guidance given to managers at Netflix is to calibrate each employee's compensation to "what they (the manager) thinks they could make if they went elsewhere." It's an extremely time-consuming exercise that every manager goes through every year.

They even encourage engineers to interview elsewhere and see what the offer is if they feel they are miscalibrated, and they will adjust appropriately.

Finally, a question they encourage engineers to ask their managers is: "if I had a job offer elsewhere, would you fight to keep me?" It's a scary question to ask, but a great way of getting feedback.

Source - worked there for 3 years.