Before 2006, New York-based Hess Corp.'s employees relied on a "pen and paper" system of signing up for and accessing their health and retirement benefits, according to the oil company's vp for global benefits, health and wellness.

Then the company signed on to a program that experts say is gaining traction among large and midsize employers as a way to better serve employees: total benefits outsourcing, which can offer a system that stays up to date with technology while staying current with ever-changing legislation. Also, the programs can offer cost savings.

"We wanted to give employees an integrated view of their benefits," said David G. Lutterbach, who is in charge of benefits for Hess Corp.'s 14,000 employees worldwide. "We had no enhanced capabilities for employees. The (change in) technology and equipment is so rapid that it doesn't make sense to buy it and to maintain it. There's a tremendous overhead with benefits administration."

Those reasons, plus the daunting task of keeping up with benefits and retirement legislation, are what prompted Hess Corp. to contract with Affiliated Computer Services Inc., a Dallas-based firm that provides total benefits outsourcing, from health and welfare to retirement plans, to more than 100 clients nationwide, Mr. Lutterbach said.

"It's really easy for a firm (providing benefits services and administration) for 100 other clients to keep up with technology and legislation," said Michael Sigmund, Little Falls, N.J.-based senior vp for ACS HR Solutions, Affiliated Computer Service's benefits outsourcing arm.

"Smarter companies are saying, 'Instead of us building a platform to run this, let's get a company to do this for us,"' said Josh Trent, Minneapolis-based vp of business development with Aon Consulting Inc., which provides outsourcing for all benefits other than defined contribution retirement plans. "They get the increased efficiency and compliancy that would be much more difficult to maintain themselves."

Companies can save up to 10% of benefits administrative costs by enlisting an outside firm, Mr. Sigmund said.

Outside firms are better prepared to handle changes, such as when a company switches its employees from traditional and health maintenance organization plans to more complex consumer-driven plans, Mr. Trent said.

Total benefits outsourcing is also a good choice for companies that want to compile companywide employee statistics, said Michael Sternklar, Norwood, Mass.-based chief operating officer of Mercer Human Resource Services.

Most, if not all, outsourcing firms provide user-friendly, comprehensive Web sites to allow clients' employees to access all their benefits information, including step-by-step guides to understanding their benefits. The simplified access to benefits brings more employers to total benefits outsourcing, experts say, and allows employees to easily change an address or their marital status.

While total benefits outsourcing companies can paint a rosy picture for companies that want to provide the best for their employees at a cost savings, experts warn that not all outsourcing firms are equally good at everything.

"I think the biggest con of (total benefits outsourcing) is it is very difficult to find providers that are at the top of the market across all areas," said Rick Hubbard, Cleveland-based North American practice leader for the technology and administration solutions group for Watson Wyatt Worldwide Inc.

This leaves employers the option of either accepting shortcomings in some areas or being more selective in deciding which firms handle which benefits. The latter is what most consultants advise clients to do, Mr. Hubbard said.

Aon's Mr. Trent advises employers to avoid the one-stop-shop approach to total benefits outsourcing, which is essentially the definition of total benefits outsourcing. Instead, Mr. Trent said employers should seek firms that can provide the greatest level of service in each area and create partnerships. "At the end of the day, they'll have optimal service," he said.

This selective benefits outsourcing approach, according to a 2008 Watson Wyatt survey of 182 U.S. companies, is a popular choice among employers, with companies outsourcing parts of their human resources functions to various firms and keeping some work in-house. That study found that only 21% of the employers surveyed use total benefits outsourcing, while 63% use a more selective approach.

There are other cons to total benefits outsourcing, Mr. Hubbard said. Many employers are still wary because many firms providing the services require multiyear contracts and many employers wonder whether a long-term contract best suits their own business objectives, he said.

In addition, many companies still want to eventually provide services in-house, Mr. Hubbard said.

Employers often feel they could lose control of their benefits functions and lose touch with their employees, who under some conditions may want direct contact with the company for which they work, Mr. Hubbard said.

"When an employee needs to be one-on-one with someone in HR within their company—whether they have a death on the family or other instance—they may not be comfortable contacting an outsider," Mr. Hubbard said.