As a small business owner, you have to wear any number of hats, one of which is human resources and finance. One of the biggest headaches small business owners encounter is submitting payroll. According to the National Federation of Independent Businesses, more than two thirds of small businesses still do their entire payroll accounting by hand.

This may be because most small businesses have a small number of employees, or because they are trying to save themselves money, but either way payroll can still be susceptible to error, resulting in penalties or interest charges. When organizing the payroll system for your business, there are a few key things to keep in mind to get the task done thoroughly.

Employee Payroll

Payroll can be tricky; from submitting the right hours to adhering to tax laws, there is a lot you have to know. As someone who doesn’t necessarily specialize in this department of business, it’s critical that you know what to watch for and how to avoid errors.

• Types of software available

Standard payroll software will allow you to calculate payroll efficiently and effectively by automating the process. Different options give the employer various amounts of control over the process. An outside accountant can also be hired to help prevent errors from occurring.

• Accounting hours and salaries

Calculating employee’s hours and salaries accurately relies heavily on the quality of your time-tracking system. Employees hours are usually recorded weekly, bi-weekly, semi-monthly, or even monthly (though this is less often the case).

• Withholding taxes and deductions

Employers are required to withhold payroll taxes from their employee’s paychecks. Payroll taxes usually consist of federal income tax withholding, Social Security tax (up to 6.2% of the salary), Medicare tax (up to 1.45% of salary), state income tax withholding, and various local tax withholding.

• Employee relationships

It is important that checks are sent out/direct deposited on time, every time. If employee checks frequently include errors or come up short, it can seriously hurt employee morale.

Employer Payroll Responsibilities

With doing payroll comes great responsibility. You’ll need to know what to report, share and file in your returns, among other things. If you know the basics, however, you can be sure to stay in the clear.

• Paying employer’s share

Employers are responsible for payroll taxes. Usually employees and employers split the Federal Insurance Contributions Act (or FICA tax= Medicare + Social Security) which totals 15.3% of combined salaries.

• Depositing tax dollars withheld from paychecks

The employer is responsible for depositing their payroll taxes in a timely manner by making federal deposits and filing Wage and Tax statements (Form W-2).

• Accounting payroll expenses through financial reporting

It is important for employers to keep track of all of their payroll expenses so their business does not get behind. If through financial reporting you find you’re losing too much money to payroll expenses, you may need to consider your budget cut options.

• Filing payroll tax returns

Employers are required to file payroll tax returns. These include: Annual federal unemployment tax return (Form 940/EZ), employer’s quarterly payroll tax return (Form 941), and annual return of withheld Federal Income Tax (Form 945).

Small business owners are frequently the ones signing checks and filing payroll taxes, however, if done incorrectly you may risk tax evasion, employee dissatisfaction and other legal repercussions.  Be sure you know the important details before handing over a single paycheck.

Kate Webster writes for lead generation resource, ResourceNation.com. She focuses on a variety of topics including standard payroll services. Follow Resource Nation on Facebook and Twitter, too!