Author: Zeinab Farhat, Progressive Legal
In business, organisations across various industries rely on service providers to deliver essential services that support their operations. Whether it’s IT support, telecommunications, logistics, or any other service, companies often enter into Service Level Agreements (SLAs) with their service providers.
The purpose of these agreements is to establish clear expectations, define performance standards, and ensure quality service delivery. In Australia, Service Level Agreements play a crucial role in fostering productive partnerships and maintaining high service standards. On this page, we’ll delve into everything you need to know about a SLA and the benefits of using one.
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A Service Level Agreement is a formal contract between a service provider and a customer that outlines the deliverables that a party is to provide another. Further, an SLA will also contain provisions relating to the level of service to be provided, the metrics used to measure performance, and the remedies or penalties for not meeting the agreed-upon standards.
An SLA also serves as a foundation for managing the relationship between the two contracting parties by setting expectations, and providing a framework for dispute resolution.
Sometimes, Service Level Agreements may be referred to as Service Level Contracts or Level of Service Agreements.
Here are some key components of a well organised Service Level Agreement, and a brief explanation of what such provisions in an SLA would entail:
An overview of the parties involved, effective date, and any relevant background information.
A description of the services being provided including the specific obligations and responsibilities of the service provider.
An outline of the performance metrics and targets that the service provider commits to achieving. They can include metrics like response times, availability, and other key performance indicators (KPIs). It is important that Service Level Objectives are as clear as possible, in order to ensure that the party tasked with meeting those objectives understands its obligations.
An overview of the agreed-upon service hours, such as the hours of operation. It may also include any provisions for after-hours or emergency support.
The process for identifying, reporting, and resolving issues or incidents. It may also specify escalation procedures for unresolved or critical problems, such as but not limited to dispute resolution mechanisms
A description of the support services provided by the service provider. This may include forums where support requests can be made, or directing the party to the relevant email address for all enquiries.
The process for regular service review meetings, performance evaluation, and opportunities for continuous service improvement.
The conditions under which either party can terminate the agreement, including any applicable notice periods and/ or any provisions for data transfer or transitioning to another service provider.
Need some guidance on drafting your service level agreement and including the correct terms? Make an enquiry below to get in touch with our experienced commercial team and we’ll get back to you within a day.
Service Level Agreements are typically used in situations where there is a formal relationship between a service provider and a customer or client.
It is suggested to use a Service Level Agreement if you are providing services to another party, or alternatively, if you are receiving services from another party.
Here are some scenarios in which Service Level Agreements are commonly used:
When a company outsources certain functions or services to a third-party service provider, a Service Level Agreement is often used to outline the agreed-upon service levels, responsibilities, and performance metrics. This can include IT services, customer support, maintenance, or any other outsourced functions.
When engaging with vendors or suppliers for critical products or services, a Service Level Agreement can be included in the contract to ensure that the vendor meets specific quality, delivery, or support requirements. This helps in managing the vendor relationship and mitigating risks.
Service Level Agreements are commonly used in service-based industries, such as telecommunications, internet service providers, and hosting providers. These agreements outline the quality, availability, and support provided by the service provider to the customers during their engagement of the services and service provider
Service Level Agreements can be employed in customer service departments to define response times, resolution times, and service quality standards for addressing customer inquiries, complaints, or support requests.
There are four main types of Service Level Agreements. These include:
Customer Service Level Agreements are typically used for individual clients. These agreements establish a customer-seller relationship. They set out the agreed level of service the customer expects to receive from the seller.
These are tailored to the specific requirements and needs of the customer. They consider their unique business objectives, service expectations, and contractual agreements. Customer Service Level Agreements allow for a more personal and flexible approach in defining service levels and performance metrics based on the customer’s specific requirements.
Multi-level Service Level Agreements are hierarchical agreements that establish different levels of service and performance commitments for various tiers of customers. In other words, the level of service to be provided to the customer is contingent upon what level the customer falls within.
This type of Service Level Agreement is often used by service providers who cater to customers with different service requirements or levels of priority.
For example, a service provider may offer different tiers of service packages with varying levels of performance. Each tier has its own Service Level Agreement with specific service level targets. The multi-level Service Level Agreement ensures that customers receive appropriate service levels based on their chosen service tier.
Service-based Service Level Agreements are focused on specific services provided by the service provider. These agreements define the performance standards and quality levels expected for the services.
Service-based Service Level Agreements can cover a wide range of services, such as network connectivity, data storage, application hosting, or technical support. They are applicable to multiple customers who use the same service from the service provider.
For example, Internet Service Providers often use Service-based Service Level Agreements to define standards of service when new customers sign up. They may guarantee 97% uninterrupted network connectivity to their customers.
However, if a customer encounters network interruptions that lead to the agreed service level not being met, this would be a breach of the Service Level Agreement. The Internet Service Provider may then offer a potential remedy in the form of discounts or compensation.
Internal Service Level Agreements are designed to meet internal business needs and establish expectations and requirements for various stakeholders within an organisation. This may include internal staff, departments, and essential business functions.
Internal Service Level Agreements can be implemented across multiple departments within a company and serve different purposes.
For instance, Internal Service Level Agreements are commonly used between a business and its IT team to outline the service levels and performance expectations related to IT services and support. These agreements ensure that the IT team understands the specific needs and priorities of the business and provides services accordingly.
Moreover, Internal Service Level Agreements can be used by companies to measure the internal performance levels of their employees. By setting metrics and benchmarks, organisations can monitor and assess their performance against these targets.
This facilitates continuous improvement and optimises internal processes by monitoring employee productivity.
Our experienced commercial contract lawyers will guide you if you’re struggling to decide which type of service level agreement applies to you. Simply make an enquiry below to get in touch with our team.
