There are several tests for set membership. One is using the COUNTIF()
function:

=IF(COUNTIF(_list_, A2)=1, "Employee", "Contractor)

In place of _list_ you would put something like G:G (for an entire
column in the same list) or Sheet1!G:G (in another sheet) or 'Employee
List'!G:G (for other sheets whose names contain spaces)

HTH
Kostis Vezerides