I always thought the contractor thing was odd. I did it once, it paid a shitload of money but you had no sick leave or holiday leave, and could be dismissed at any moment. I was contracted via a recruitment company, they had some sort of payroll company set up, so I technically worked for that.
I think the contract thing is so they can allocate the bill to various departments, all my work had to be marked as Capital, not business as usual etc.