I wish to hire at least one "hireling" to be a permanent follower. I don't mind at all having to pay the original hire price, but I really want him/her to eventually react like a regular follower if dismissed and recruited again (i.e. no fee). Is there some way to get rid of the rehire fee for mercs?

If you try to rehire them after a short period of time, they go with you for free. I don't know how short that period of time exactly is.

Thing is I want them to become proper allies after a while for story and realism purposes, just as Han Solo went from being only in it for the money to being a real friend over the course of the SW movies. I really want to give them that sort of arc, where after a while they'll go on a quest no matter how long you've not "recruited" them. One or two at least I want to be rehoused at my castle once it's built. There they'll live until I need them on a quest. But for them to still demand money will kill the realism of the story arc.

Hmm... If you're on a PC, you can look up mods, but I'm not sure if I've seen a mod that does that.

Yep, I'm on PC. I was thinking maybe console commands might do something? Illia at least used to have a bug, where you couldn't recruit her again after dismissing her. That was supposedly corrected using the console. I was hoping that mercs might have a similar console command, or even a mod like you suggested.

Never used hirelings... I actually thought that they became regular followers after you'd paid their fee once... Huh... Cool, actually.