Too often, you find that the employee you consider the most loyal to be the same employee whose compensation, relative to their performance, is not at all what you would expect of someone who has been with the company for so long. This employee most likely has seniority and tenure, but is really far from "loyal". They show up for work on time, never miss a day, and have been with you for a while. Don't feel too badly because you are not alone.
Webster's dictionary defines the word loyalty as "faithfulness to one's duties and obligations." This loyal employee not only shows up on time for work, but also performs well and tries to step up their daily performance. In turn, you could say that other than lying and stealing, the most disloyal thing an employee can do is continue to cash their paycheck even though they are no longer producing the results you should expect from them.
If you are still hung up on the "he's been with me for so many years" excuse, your inaction must be examined. Consider this example. A couple has been married for forty years and an outsider comments that the husband must be a loyal husband to have stayed married for so long to one woman. However, if in the course of that time, the husband has been detached, indifferent, and selfish, you might want to change your position about how loyal he has been. The same rationale stands with a loyal employee who is no longer living up to his or her potential.
The bottom line emphasizes how important it is that you do what's right for your
business and for the entire team, not just the long time employee. What kind of culture, standards, momentum, and morale are best for the entire team? I only see two choices:
(1) Help that "loyal" but plateaued employee to perform better; or
(2) Replace them with a better person.
This is your business, the food in your children's mouths. It's okay to expect more. Give yourself that permission.