Problem:

-> I'm checking if the record exist in Contact table or not. If it exist then I will insert into employee table else I will insert into contact table then employee table.

Re-reading your question, I don't think MERGE is what you want. As I understand it, your logic should be really simple:

IF NOT EXISTS (SELECT 1 FROM Contact WHERE SomeField = @SomeValue)

BEGIN

INSERT INTO Contact(fieldlist) VALUES (valuelist);

END

INSERT INTO Employee(fieldlist) VALUES (valuelist);