If she comes at 6am and leaves around 2pm, having spent 8 hours at your house, it makes sense to pay her. Even if you are still there. If she's not watching your kid (meaning ensuring safety) while you're gone, then why is she there?
It really depends on local conditions, and what you can afford.
Our friends pay about $10/hour to watch her 2 daughters, near Portland/Newburg, OR.
$20/night was the going rate almost 20 years ago in our area.
I earned about $7.50/hour (minimum wage) for a city job where I served sleeping guests overnight. We got about 5 hours' sleep on the job, and spent the rest of the time handling details and emergencies. We had first-aid training; and we got 1 or 2 meals on the job.
If you're paying more than you can afford for the service she offers, here's some ideas.
You could talk to her about an 'on-call' rate when you're there (think 1/2 price). She can sleep, read, watch TV, whatever. When you need her to be awake and 'on-duty', the rate goes up and so do your expectations.
Think about your 8-hour job, and what's fair pay.
Think about what she offers your kids, and if she's worth more or less than day-care.
Find out the going rate for babysitting, nanny, au pair, & day-care in your area (ask around). Don't rub it in her face, just know what you'd have to pay if she quits, and what you'd get for that money.
If you're concerned you can't pay what she's worth, talk to Sis about 'side benefits.' Is she happy working in the family, or does she feel like she's doing you a favor?
You could offer to pay for her training (food handler exam, First Aid/CPR, Early Learning, online classes, etc), or a membership at a local child-friendly attraction, so she gets better skills and your kids get better care.