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);