Employee status change

Hi,

I have following requirement from Client

Company has Permanent and Contract Employee Groups.Contract Employee are under vendor payrolls.But after certain time,contract employees can become Permanent.I have maintained to employee groups and maintained different number ranges for both these groups.But i am not able to get the logic as how to capture. If i want the employee number to change from Contract to permanent,how should i do it? Shud i terminate him and rehire as permanent?Pls suggest.

Thanks