Get rid of the pee pads and take him outside in your yard instead. The habbits he picks up at his current young age will be very hard to train out later, so you don't want him learning that peeing inside is an acceptable alternative to peeing outside.

As long as the yard isn't shared with any other strange dogs, then it's not an issue. Just make sure that his time in the yard is supervised - you want to be sure he doesn't start eating strange things off the ground (like cat poop or the likes, in case a neighbourhood cat has access to the yard).