I've been in a similar situation twice! Yeah, I should have probably learnt first time round, the problem for me was that they were both family friends. Both were between jobs and looking for something to do as a stop gap. That stop gap ended up with me employing them and the new job search ending. Initially it worked well then, they got comfortable, and productivity slowed, without being blunt I could see why they were between jobs. I'm an easy-going person so like to give everyone their fair crack and I pay well too, it started with turning up late, then taking holidays/ days off at their convenience and short notice, no matter what work I had lined up. Usually scaled up to meet the increased staffing. Next thing you are working on your own, achieving similar output to when two of you are there and got another wage to pay, so end up working harder for less profit. In each scenario I sat down with them both and explained why I had taken them on and what the company required of them to keep moving forward. During the discussions I asked if they had any suggestions or things we could improve on or change and ultimately did they see this as the career for them. The first said, he was looking to go and help his mate 50% of the time as they'd started a fencing business on the side, hence booking random days off. The other said they actually wanted to be a salesperson not a mechanic

luckily for me they chose to go their own ways. I think ultimately you are not in business to carry others, if you feel it has got that way and you've had a reasonable discussion about it, then really, I think you've to do what's best for you. If that means finding an amicable solution to them not working for you then so be it. At the end of the day, they are setting the image for your company, a lot of people employ my services because of me not who I employ so to send someone who doesn't un hold the same standards is a sure-fire way to reduce the client base.
The second person I employed I did offer them the option of using my contacts and my help to find them a more suitable career could that be the case with your nephew. That way nobody can say you haven't done everything within your power to see them right, may be another step worth taking because they are family?