I largely disagree with this premise.
We should be encouraging people to grow, and we should be rewarding them based on something as close to product/customer impact as possible.
If someone is an incredible Senior dev who doesn't want the cross-team responsibilities of a Staff dev or people management responsibilities, then yes, they should be OK to stay as a Senior dev without pressure that they HAVE to do something else. This doesn't mean that you should pay them as much as a Staff, because a Staff has more impact and that's why you're paying them more.
In particular, you want well-defined pay bands for job titles, because otherwise things get unfair quickly. Best case people find out that people are getting paid rapidly different amounts for the same job, get angry, and leave. Worst case there's a pattern where you're paying all of demographic X less than everyone else and you get sued.
I'm finding myself in this position right now. For almost two decades I have worked as a software engineer, slowly learning more and becoming more capable at designing and developing software. Yet, we have a significant lack of leaders and managers. I have been asked several times to take on such a lead role, but what makes me great at developing software does not make me great at organizing and managing a group of people. I have tried it - it didn't go well. Those aren't my interests or my aptitudes. Still, management keeps trying to get me to take on these vacant roles just because they know I have done well for them in everything else, but they overlook that they are asking me to do something very different from the thing I have been shown to do well.