Good post Johnny.
Paying to work with paying passenger on board is a fraud, because everything is already paid for by the passengers. This is an international trade law under the World Trade Organisation: one cannot sell his products lower than what it initially cost him, this is to protect fair trade competition.
Renting an airplane for touch and goes without passenger on board, renting a simulator without paying passenger on board, obviously, is very bad HR policy but could be justified in some ways, like somebody has to pay for this simulator, your company or you, that's a fact: we know where the money goes to.
However paying to work when there is nothing to pay for looks like corruption money to me. If pilot unions wanted to fight this one, there is a good chance they would win.
If somebody doesn't have the level to fly an airliner, for whatever reason (not enough experience), so he shouldn't be in this airplane, there is no way to use the low experience level to make an individual pay for something that is already paid for.