This is only true if the only way to get compensation increases is via a promotion. Granted at many companies this is true, but it probably isn't true at Square

This is only true if the only way to get compensation increases is via a promotion. Granted at many companies this is true, but it probably isn't true at Square. If you get promoted to Senior level, the assumption is that you're getting paid what a senior should be. If then, you take on additional responsibility above and beyond what a Senior is doing, you get merit increases up to some higher point. That is, a Senior who is getting 5/5 performance ratings probably makes more than a Senior with a 3/5. Eventually, that 5/5 person might get promoted (I say might because an exceptional Senior might not make a great Staff engineer. Someone really good at implementing things quickly, but with terrible design sense won't make it to Senior in a lot of orgs, for example, even though they might be a very strongly performing Engineer) to the next level, at which point the process starts again.