1. Drop the regular sock yarn and then knit the heel section (half the number of stitches of the sock) using contrasting waste yarn. Turn and purl back to the beginning of the waste yarn stitches. Cut waste yarn leaving a short length.
2. Using the regular sock yarn continue to knit the sock as usual.
3. After the toe is completed come back to the waste yarn section of the sock. Beginning at the last worked row of waste yarn, unpick the stitches and place on a needle. This is the top row, not the bottom row.
5. All the top stitches are place on needle. Count to make certain that the amount of stitches is half of the cast on number for the whole sock. The first row of waste yarn stitches are now waiting to be placed on two needles, half of remaining stitches on each.
7. All the stitches are on the needles. Using the sock yarn again, begin to knit from the center of the heel space. At the left edge pick up a stitch. At the beginning and the end of the next needle pick up a stitch (at each end). And at the beginning of the third needle pick up another stitch. Four new stitches in all. Knit a round. Then begin to decrease at the sides of the sock as for a toe, every other row. Yes, a toe. It seems wacky to knit a toe as a heel but in reality it works just right.
Here's one example of the decreases that form the heel. I used k1, ssk,on the right hand needle and then k2tog, k1 on the left side.
And for this heel I eliminated the k1 stitches and placed my decreases at the end and beginning of the sides. Some feel this looks more like a heel and less like a toe. Whatever looks good to you!
If the heel should develop wear and needs replacing, just unravel back to the beginning of the heel and knit a new one. Simple.