QB Issue Resolution:
You cannot convert a vendor to an employee but you certainly can add one. To get around the duplicate name prohibition add a period to the end of his/her name as co tractor and then add as new employee. Or add the period to the employee name.
Resolution for Issue 'How can I convert contractor to an employee for last 3 months?' available: Yes (Solved).
Source: Intuit Community forum.
How can I convert contractor to an employee for last 3 months?: this issue or error code is a known issue in Quickbooks Online (QBO) and/or Quickbooks. Support for this issue is available either by self-service or paid support options. Experts are available to resolve your Quickbooks issue to ensure minimal downtime and continue running your business. First try to resolve the issue yourself by looking for a resolution described below. If it is a complex issue or you are unable to solve the issue, you may contact us by clicking here or by using other support options.Support for contractor
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Error Recovery for contractor [Canada]
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