I would say they are very useful all the way until they stop leveling at level 7. But, again, only if you get the more expensive one, and it's a level above you. The 1st couple of levels it makes the most difference, but it helps a ton on the next handful as well. I don't need better armor if the Merc is taking hits (as long as it doesn't die). I don't need a good weapon if the Merc is doing damage (as long as it doesn't die). It's the best use of money if you need help. Easily.
I'm on my 3rd playthrough, with the warrior. 1st was wizard, then thief. I don't know if I could have made it without the mercenary with the wiz and thief. Would have been very hard. Warrior didn't need it, but I got Griselda almost immediately.