Definition: Service Level Agreement

This free resource is not for resale or redistribution. | Last updated: 3 December 2020

What are they, what should they have in them and what's the purpose of a Service Level Agreement?

A Service Level Agreement (SLA) is a document that is used to define the level of a service that exists between a service provider and their customer. An SLA should record a common understanding about services, priorities, responsibilities, gaurantees, and possibly the right to componsation or penalties for underperfomance on the side of the provider.

The primary purpose of an SAL is to set expectations and keep companies accountable for delivering on their promises. The document may be an informal contract between parties or a legally binding contract. It may be a standard issue document issued to all / certain groups of customers, or it may have been specifically negotiated between customer and provider as part of a wider business negotiation.

The SLA is generally in expressed in a simple language so that it can be clearly understood by the customer. The document may also include more technical terms for defining the service. The Service Level Agreement is often part of a wider service contract.

A Service Level Agreement can be an informal contract that defines a supplier/customer relationship (without legal restrictions) or it can be a binding contract.

The SLA may address several areas including the availability of the service, the performance of the service, how it will operate, priorities, responsibilities of involved parties, guarantees and warranties.

As well as defining key areas, the Service Level Agreement may also specify a level of service, including targets and a minimum level that can be reached.

Industries where Service Level Agreements are common are: telecoms companies and IT service providers, Internet Service Providers (ISP), public sector bodies and business process outsourcing companies.

Other important documents:

  • Statement of Work
  • Operational Level Agreement
  • Meeting minutes
  • Operating agreements
  • Non-disclosure agreement
  • Memorandum of understanding
  • Terms of use
  • Privacy policy
  • Invoice template