If you are already conflicted after working with them for 7 years, the answer is most likely No. By now, the answer should be a clear Yes. However, the devil is always in the details. FOr the 7 years that the employee has been with you, it seems like they do the usual 9-5 and you feel that's not enough to get equity.

I would however ask you to look at it a bit differently. First, no one would work as hard as you on your business, period. A 1-3% stock in a private S-corp is not end of the world for an employee that has been with you for 7 years and you can trust their work. I think you are conflicted because they are not on call 24/7 like you and you feel it is not fair. Let that go. No employee would ever be like that and if they were, they would be demanding a lot more equity if they were smart.

Can you lose that employee and not lose sleep ? If yes, then they don't need equity. If they are very valuable to the business even with a 9-5 work style, you should consider giving them a small portion of equity. You could ask them for a bit more in return as well.