Commercial Agreements

SLA Template: Service Level Agreement Guide

Service Level Agreements set measurable standards for service delivery. Get your SLA right and you will have clear expectations, fewer disputes, and better service.

Last updated: February 2025

What Is a Service Level Agreement?

A Service Level Agreement (SLA) defines measurable performance standards for service delivery. It can be a standalone document or form part of a broader service agreement. SLAs are most common in IT, telecoms, and managed services but are increasingly used across all service industries.

  • Defines specific, measurable performance metrics for the services being provided
  • Sets out how performance will be monitored, reported, and reviewed
  • Specifies remedies if service levels are not met, such as service credits or termination rights
  • Should be reviewed regularly and updated as business requirements change

Defining Effective Service Levels

Good service levels are specific, measurable, achievable, relevant, and time-bound. Vague commitments like 'best efforts' or 'reasonable endeavours' are not service levels — they are unenforceable aspirations. Every metric should have a clear measurement method and reporting frequency.

  • Availability: typically expressed as a percentage uptime per month, such as 99.9% availability
  • Response times: define different priorities (P1 critical, P2 high, P3 medium, P4 low) with response targets for each
  • Resolution times: how long until the issue is fully resolved, not just acknowledged
  • Exclude planned maintenance windows and force majeure events from availability calculations

Service Credits and Remedies

Service credits are the standard remedy for SLA failures in UK commercial contracts. They provide financial compensation to the customer without the need for a breach of contract claim. The credit structure should incentivise good performance without being punitive.

  • Service credits are typically a percentage of the monthly fee, capped at 10-25% per month
  • Structure credits on a sliding scale — small credits for minor misses, larger for significant failures
  • Credits should be the sole and exclusive remedy for SLA failures to avoid double recovery
  • Persistent SLA failures (e.g., 3 consecutive months) should trigger a right to terminate the contract

Key Takeaways

  • Effective SLAs use specific, measurable metrics with clear measurement methods and reporting frequencies.
  • Service credits should incentivise good performance on a sliding scale, not punish isolated failures.
  • Persistent SLA failures should trigger escalation procedures and ultimately termination rights.

Frequently Asked Questions

What is a reasonable SLA for a small business?

For most small business services, 99.5% availability (approximately 3.65 hours downtime per month), 4-hour response for critical issues, and next-business-day response for routine requests is reasonable. Avoid demanding 99.99% availability unless the cost of downtime truly justifies the premium pricing that comes with it.

Are SLAs legally enforceable in the UK?

Yes, if they form part of a binding contract. SLAs should either be incorporated into the main service agreement or referenced as a schedule that both parties sign. The remedies (typically service credits) should be clearly defined. Without proper incorporation, an SLA may be treated as a non-binding target.

What is the difference between response time and resolution time?

Response time is how quickly the service provider acknowledges the issue and begins working on it. Resolution time is how long it takes to fully fix the problem. Both should be defined in the SLA with separate targets. A fast response with no resolution is not acceptable, and the SLA should reflect this.

Related Guides

Service Agreement Template for UK Businesses

Terms of Business Template: B2B Guide

Statement of Work Template: How to Write an SOW

Payment Terms for Contracts: What to Include

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This is guidance for UK businesses, not legal advice. For complex legal matters, consult a qualified solicitor.

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