How about this for a simple merc system?
A group of mercenaries show up at your trade depot. They'll demand a certain initial wage of trade goods and a continuing wage. So something like 1,000 dwarf bucks to start and 500 dwarf bucks a year.
If you agree, you'll transfer the desired amount of goods over to them (you won't get any change for over spending, and if you don't get the goods fast enough, they'll leave, just like caravans.)
If you pay them, they'll stay on the map and be counted as allies, otherwise they leave (they're not bandits, they won't seige your fort for not paying them).
Now in some ways they operate like normal dwarves. They need to eat, drink, and sleep. They'll sleep in the barracks, eat and drink whatever they can (perhaps going off to hunt if there's not food).
They won't have a morale per se, and they'll never tantrum. Instead, the game will announce that due to poor treatment, the mercenaries are abandoning you. They'll switch over to neutral (and thus ignore and be ignored by other enemies on the map) and leave the map.
You won't be able to control them directly. They'll always be counted as soldiers and thus will never do any work. They will appear on your military screen so you can order them around but you won't be able to select weapons or gear. They will always use their own weapons & gear. If for some reason they ever lose their items (like you strip them down while they were sleeping) they'll "claim" new weapons and armor of the appropriate type. If none exists, well they walk arouond with what they can find...
So you can order them on duty and off. When off duty they'll usually just sit around and do nothing, but they MIGHT (very low chance) spar in the barracks. Although historically mercenaries were used to train up armies, in dwarf fort having a bunch of expert swordsmen without being able to remove their equipment hack away at a bunch of n00bs is a recipe for disaster. While sparing remains as dangerous, mercenaries probably woulnd't want to risk themselves.
When on duty, you can move them around like any other squad.
Each year at the same time they'll drop what they're doing and head to the trade depot. You'll have to trade with them to pay their wages or else they'll leave.
The main issue I see is what will the mercenaries do with their stuff? If you have mercenaries for 10 years and pay them in tables & floodgates, how the hell will they haul all that stuff out when they're done? If you have them store it in a chest or something, what's to stop a player from locking their doors and not letting the mercenaries leave with allt he jewels and coins you traded to them.
My thoughts would be that they'll have weight limits like caravans (and thus would need to be paid in small, highly valuable objects like gems & coins). They will transport it off the map and then return immediately afterwards. This would also be a good way to keep their armor & weapons stocked. Instead of claiming new items they might just "respawn" with their original gear. To prevent players from using them as "free equipment generators" first it would be low quality steel equipment, and second if when they leave they have less "wealth" then when they arrived, they don't come back.