Employees will definitely shop around if it means they can force higher pay. If they ever get an offer from a huge company, you would get stuck trying to match

Employees will definitely shop around if it means they can force higher pay. If they ever get an offer from a huge company, you would get stuck trying to match what such companies can afford, even if they didn't actually intend on leaving, and just wanted a raise. Then when the rest of the staff know how much they could be making, you'll end up with a lot more problems - either you'll have to raise them all, or put up with disgruntled employees who want to leave because you "aren't being fair" to them. It also doesn't force you to keep someone who is under-performing and raise them to the rate offered by another company that isn't necessarily aware of why you do not believe they are worth that amount. Also don't forget that they can tell their new offer that they got a counter offer, and there is a good chance they'll raise them even higher since they've already deemed the candidate valuable enough to hire, and started that ball rolling already. Essentially it's a two-step bidding war that is stacked against you. This is basically why it's best to not say anything out loud. There will be times that you will not feel so generous toward an outbound employee.