While it is commonplace in today's competitive global market for companies to export part of their manufacturing processes to countries with lower wages, it may come as a surprise that many employee benefits outsourcing vendors are doing it, too.

The primary reason for going offshore for these services is the same as for manufacturing: to save money.

Another reason is to improve the quality of service by virtue of the fact that lower wages means more people can be employed to answer phones or do other simple tasks. Using offshore call centers to handle less-complex administrative tasks also frees up resources in the United States to handle those that are more complicated, experts point out.

In some cases, employers that have global operations are asking outsourcing vendors to set up shop overseas because they want their benefits administration to be handled globally as well.

But while many benefits outsourcing vendors have already taken the leap offshore and others are considering it, there are a few holdouts that fear the risks of such ventures may outweigh any potential rewards.

India is currently the leader in the benefits outsourcing business, while the Philippines is running a close second. These two countries are so attractive not only because the prevailing wages are much lower than they are in the United States but also because many people in these countries already speak English.

Furthermore, a large proportion of Indians and Filipinos also has experience in handling U.S. customer service business, having worked previously for companies such as General Electric Co., American Express Co. and Citicorp Inc., which have been in India since the late 1980s. Likewise, American International Group Inc. and Proctor & Gamble Co. have outsourced customer service business to the Philippines for nearly as long.

"If a company is doing any kind of documentation in three-part forms, it's very likely it's being done offshore," said Atul Vashistha , chief executive officer of San Ramon, Calif.-based offshore consulting firm NeoIT Inc.

This would include such activities as enrolling in a health insurance or 401(k) plan or making any status changes thereafter, he explained.

"The reason is, it requires a tremendous amount of data entry, and it requires distribution," Mr. Vashistha explained. "So what's happening is, many of those things are being scanned here, so it gets collected in one place, then it gets sent over and they make any data corrections that need to be made and forward it to the right people."

In some cases, benefits outsourcing vendors are using offshore call centers to handle "tier-one" communications-essentially, scripted responses to basic questions-with more complicated inquiries sent up the line to higher-level employees in the United States, according to Rich DeFrehn, a senior consultant at The Segal Co. in New York.

The structure is similar to the way computer manufacturers have been providing technical service to customers for years, he added.

"They use offshore call centers, so you're talking to somebody in India or Pakistan," Mr. DeFrehn said.

And while many of these offshore call center employees may have distinguishable accents, that shouldn't be a problem, because "we have accented people here in the States," he pointed out. "If the person is given the appropriate information, it shouldn't matter if the person giving it has an accent."

In some cases, outsourcing vendors are even providing "accent neutralization" classes to employees so that they'll sound more like Americans, according to Debashish Sinha, principal analyst in the information technology services and sourcing group at Gartner Inc., an IT research and advisory firm in Stamford, Conn.

The speech coaching is usually given in a two-week intensive course as part of the employees' initial work training, during which they are also taught phone etiquette and any cultural differences that may be relevant to their customer contact activities, he explained.

Some outsourcing vendors even try to assimilate the employees in their offshore call centers by providing them with Internet connections to local weather information and news and by posting photographs of U.S. worksites in their cubicles, several sources say.

"I actually thought health care would be one of the last to go," but, "as they simplify health plans and use more self-service, it makes it easier to move offshore," observed Debra Schmitt, a senior consultant and leader of the call center effectiveness practice in Los Angeles at Sibson Consulting, the human capital consulting division of The Segal Co.

Using offshore call centers also can be more cost-effective, resulting in significant administrative cost savings to employers, she added.

"Some employers are adverse to using offshore outsourcing, but when they realize the savings they can have," the attitude changes, according to Ms. Schmitt.

Some companies have achieved savings of as high as 400%, particularly if their U.S.-based call centers had been operating inefficiently, she said. But, on average, using offshore call centers can shave about 40% to 50% off the bill for health plan administrative services, she said.

"Employers are under the gun to cut costs," and using offshore resources may be preferable to reducing benefits, suggests Craig Weber, a senior analyst at Celent Communications in Boston, a research and advisory firm dedicated to helping financial institutions formulate business and technology strategies.

Celent predicts that offshore IT spending by North American insurers will increase from $695 million in 2003 to as much as $1.5 billion in 2006.

The quick return on investment is another compelling reason for using offshore call center and IT resources, he said.

"This is not the equivalent of an IT development budget with an 18-month ROI," Mr. Weber explained. By contrast, an offshore IT operation usually starts paying for itself in just six months, he said.

There are also "downstream cost savings," according to Gartner's Mr. Sinha.

"Once these organizations really understand the HR processes, they begin to leverage best practices and bring some of those back to the client organization through process improvement," he said.

Towers Perrin Administration Solutions is considering an offshore strategy to meet the cost criteria of its employer clients, according to Bob Lopes, global managing director in Philadelphia.

"Right now, in terms of what the marketplace expects from the vendors, in terms of the cost of services, in terms of recent bids over the last 12 months, the marketplace is already demanding prices under the assumption that benefits outsourcers are invoking this solution already," he said.

But cost is not always the driving force behind moving benefits call center operations offshore, according to Betty Zikakis, vp of marketing at Workscape Inc., a leading provider of Internet-based human resource services based in Framingham, Mass.

"I talked to one of our large customers about it. They said they have a global organization, so why should the call center be in the United States and only provide English-speaking customer service representatives," she said.

And using offshore call centers to handle the more mundane tasks may actually lead to better service, said Mr. Lopes.

"By moving offshore the commoditized services," such as change of address, scanning, image indexing, etc., "it frees up the more experienced resources we have onshore to do higher-order functions," like managing a qualified domestic relations order, helping employees balance their 401(k) portfolios or providing health advocacy services, he said.

But not everyone is sold on the idea of shipping even the simplest benefits administration tasks to Third World countries.

"All the hype is moving call centers to India," said Anthony Lowe, a consultant at Mercer Human Resource Consulting based in Princeton, N.J., who leads the U.S. administration practice. "We've looked at that. We are skeptical that the economies are really there and achievable. Plus, we have a concern about the ability to provide seamless service."

Instead, Mercer is responding to U.S. employers' requests to do what is commonly called "nearshoring," and setting up call centers and other tier-one benefits outsourcing services in nearby Canada.

"That approach is a less risky approach than shipping the whole thing off to India," Mr. Lowe explained.

John Haley, president and chief executive officer of Watson Wyatt Worldwide in Washington, agreed.

"There are some financial reasons to look at this. But there are a lot of issues around culture, not to mention security, after 9/11," he said.