Tim:
You have a hard problem to solve. Whilst a humanitarian outlook is a good thing to have in the outlook for your employees, business still needs to be business. In the case of a small business like yours it can be very hard to overcome the binding that "friend" creates. There are methods to give a carrot to non-investing partners but I will say with assurance that if business success goes sweet or sour it very common that "friend" does not workout. It is really necessary to have an equal participation and obligation on the part of partners.

Many wise people have said that it is not the best idea to go into business with your friend or family member.

In your case it may actually be the best to find another person that can do equivalent work and then offer them normal employee terms without having "friend" be part of the equation.

Michael Karas