I am an hourly employee, my company wants me to work Saturday as contract labor instead of hourly. I come out ahead because I will be paid more than double my hourly? I just wanted to know if it is legal to have separated pay.

If by "contract labor" you mean no taxes being withheld from your check, the hours not being counted for FLSA purposes (including overtime) and your employer pretending that you are a so-called indendant contractor, then it is extremely unlikely that this action is legal.

http://payroll-taxes.com/articles/art2.html

Should it be hourly or can it be piece work. Should taxes be withheld or not.
Thank you for your quick reply.

A worker legally is normally either an employee or an independant contractor. It is not normally legally possible for the same worker to be both an employee and an independant contractor for same employer at the same time. It is almost certainly illegal for the employer to consider you to be an independant contractor on Saturday if you are an employee during the other days of the week.

Should it be hourly or can it be piece work. Should taxes be withheld or not.
Thank you for your quick reply.

I don't see any problem with your pay being piece work some of the time. Let's say you are a receptionist working 37.5 hours per week, Monday through Friday, earning $10 an hour. You work Saturday and Sunday cleaning the offices for a flat daily rate of, oh, $50 per day, whether you get the job done in an hour each day or ten hours.

You get the weekend job done in an hour on each day, you total hours for the week are 39.5 and there is no problem (oh, the total pay gets taxed, trust me).

However, if the weekend job takes you two hours each day, then there is an hour and a half of overtime. The employer would have to figure your total pay ($375 for the receptionist job plus $100 for the cleaning work), divide by total hours to determine the average hourly rate, then pay you half that amount by the number of hours of overtime to pay you correctly. That average hourly rate can not drop below minimum wage (which would happen if the weekend job took you, oh, 43.5 hours).

Working off payroll for your employer is likely not legal, with some exceptions. Say that you owned a cleaning business and had customers other than your employer. That might be okay. As an employer, I would worry about it though, if you were personally doing the work. I would not worry if you had YOUR employees doing the cleaning work.