So you're paying her, but she is simply not working? There's only one thing to do here and it is as obvious as it gets...
You're just being a charity here, she's taking advantage, screwing you over, because she thinks you don't have the balls to fire her.
Its not about balls. This woman is part of may family. Not just a mother in law that inconveniences me and gets in the way once a year when she comes to visit and on holidays. I have worked with this woman every day for the last 3 1/2 years.
I actually do care what happens to her.