Firstly, this is not the correct syntax for the row_number() function, since you are missing the over clause (as a result, the ORA-30484 error occurs). Even if that were the case, it would not work, since you cannot directly use the window functions in the set clause (which leads to ORA-30483 error).
For this, however, you can simply use the rownum pseudo-column:
UPDATE employee SET empid = ROWNUM;
SQLFiddle
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