I do figure that if a kid is old enough to work full time in the family business/hobby, they are old enough to be paid reasonably for their work. A case where their labour is needed to keep the family fed and housed is a little different, but this situation isn't that - this is a hobby for the grandparents, not a matter of financial survival.
And yes, they could subtract off room/board/utilities and pay their grandson what remains of a fair wage. Personally, I think that's very weird message to give to a tween, though, as in our society expecting a kid that age to pay for their keep is very unusual; it's generally regarded as the parents' responsibility to feed/clothe/house their kid.
I do think safety is an issue here. It doesn't sound like said tween is experienced in home repair, construction, or working around electrical projects and so on. And teens are particularly vulnerable to unsafe or unfair work conditions, partly because of lack of experience/judgement, and partly because of the power imbalance. If a kid can be told, on the first day of vacation, "Oh, by the way - this summer you're working 40 hour weeks renovating a house. No, you don't get any say, you don't get a vacation this year, and no, you don't get paid. I don't care if you don't like it, you're doing it anyways," then they *don't* have the power to speak up and say "I don't feel safe doing that" or "I don't want to go up on the roof on a ladder" or "that's too heavy for me", because the power balance is do what you are told and don't talk back. And if they aren't comfortable, unlike an adult, they cannot leave, and cannot refuse to do the work.
As an aside - I grew up with parents who were big do-it-yourselfers. My dad built an extension on the house (legally), we had a big vegetable garden, my parents did all their painting/papering/flooring themselves. I know how to do much of this myself. But I've spent my entire adult life in rental apartments, where anything more complicated than changing a lightbulb has to be done by the landlord.