An employer can certainly have some employees and some independent contractors for different roles, and an employee for one company can perform contract work for another company. It is only in very unusual situations, however, that a person will have one role as an employee and another role as an independent contractor for a single company.
The IRS and the U.S. Department of Labor have specific criteria for determining who is an employee and who may be classified as an independent contractor. These criteria focus on the overall relationship workers have with their employer. Workers who are economically dependent on an employer and look to that employer to tell them how and when the tasks that make up their job are to be done are employees. Workers in business for themselves who retain more control over how the finished product is achieved are independent contractors.
The government is cracking down on misclassification of workers, so you definitely want to make sure you’re classifying this person correctly. Classifying the worker as both employee and contractor can be a red flag for the IRS. When filing taxes, the individual will be reporting wages earned (via a W-2) as well as earnings as a self-employed individual (via a MISC-1099) which may invite an IRS investigation into the actual circumstances.
Your safest course would be to classify and pay this worker entirely as an employee for all the tasks they perform. This way you avoid the risks of misclassification and ensure that the employee receives the appropriate legal protections. However, if the employee has an established outside business, and the contract work the employee is doing for you pertains to this outside business and not to their employment duties, then you may treat the employee as an