Start with an honest and transparent conversation between the three of you. Bringing someone in-house F/T when they've been working remotely P/T changes the relationship dynamic, so it's important to emphasize honesty, respect and approachability on all sides from the get go.

If there's an impasse around anything financial, explore other options that your developer might consider to be equally as important – both in the short and long term. Telecommuting, flex hours, additional health benefits for their family are just a few options. Longer term, if you see potential in them as a tech lead or CTO, paying for outside technical or leadership courses may be exactly what they need to feel you're making an investment in them.

I'm happy to jump on a call to talk further, and help you create a plan.