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A service level agreement ensures a successful working relationship between clients and service providers. Not surprisingly, they can be a little complex and tricky to understand.
This guide helps to clear up the key points of service level agreements, including how to write one. Plus, where to find free legal documents and templates.
What is a service level agreement?
A Service Level Agreement (SLA) is a contract between a service provider and a client. It defines the details and expectations of a service that's expected from a vendor. An SLA helps both parties of the contract understand their responsibilities more clearly.
An SLA should clearly state the services to be provided, the responsibilities of each party, penalties for a breach of service and the general terms of the agreement. Its key purpose is to prevent misinterpretation and lay the basis for productive co-operation.
Download this service level agreement template at Lawpath
When should I use a service level agreement?
A Service Level Agreement may be used in a range of circumstances. This includes situations when there's a need to:
- Set clear and measurable work outcomes
- Manage a project incrementally
- Explain the expectations of each party
- Penalise or reward performance
- Establish responsibility for complex requirements, such as construction projects
- Contract or provide an IT or a range of other technical services
The most common types of organisations to use an SLA tend to be those who work in Information Technology and Communications (ICT). However, the company receiving the service isn't always going to be an ICT company. For example, most businesses and government institutions can be heavily reliant on IT systems. What this means is that SLA's are becoming more common among non-ICT organisations.
Service Level Agreement vs Operational Level Agreement
An SLA can be defined as a documented agreement between service provider and client that identifies both services provided and the expected level of service. This is usually between two separate organisations. An Operational Level Agreement (OLA) is usually part of an SLA. The difference being that an OLA considers the business units that contribute to the SLA. The objective of OLA is to provide guidance on which units support the various responsibilities contained in the SLA.
What is included in a service level agreement?
What should be included will depend on the type of services required. Here a list of the common things that are included in an SLA:
- Types of services provided
- Terms, conditions and standards of the service
- Intervals (monthly, yearly, etc.)
- Responsibilities of each party
- Escalation procedures
- Relevant stakeholders
- Reporting and dispute resolution process
- External service providers
- An indemnity / penalty clause for breach of service
- Service requirements
- Terms of making amendments to the SLA
What not to include in a service level agreement?
A Service Level Agreement doesn't have to be bulky or overly complicated. Avoid unnecessary information that adds no value. Essentially, an SLA describes what the service is.
Describing the ins and outs of how the service is going to be provided isn't usually needed. Legal jargon is hard to avoid in an SLA. However, it is important that everything is clear, can be understood and it watertight from a legal standpoint. Any ambiguities in an SLA should be identified and removed.
How effective is a service level agreement?
A good SLA will grow the business because of improved customer relations. It also creates the environment for professional relationships to build, develop and create value. It does this as the basis for effective communication between all stakeholders. A well designed SLA ensures that the terms of an agreement are met. This means that the SLA is critical for completing projects and meeting business goals.
Do I need a lawyer for service level agreement?
An SLA is a legally binding contract between a client and service provider. For that reason, a contract lawyer may be a sensible and safe option for you to consider. The legal part of an SLA is usually quite complex, and you may choose to get legal advice after the document is written (a service which is commonly offered by legal template providers; see below). This is mainly to be prepared should the need for litigation occur in the future.
Due to the high cost of litigation, it’s reasonable to consider legal advice as an essential part of completing an SLA.
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How do I write a service level agreement?
Because of the complex nature of the ICT industry there isn’t a one size fits all SLA. Depending on the kind of service offered SLA’s can vary significantly. There are three main types of SLA:
- Client-based SLA. These are usually designed with a single client with the SLA relating to all of the services provided to that client.
- Service-based SLA. This is an agreement between a service provider and multiple clients who are all provided the same service and share a similar agreement.
- Multi-level SLA. This type of SLA has a large crossover between client based and service based SLA's These contracts will usually be designed by large companies with major service offerings.
The following key components may be included in a service based SLA:
- The type of service
- Performance level required
- Monitoring and reporting processes
- Complaints and disputes processes
- Resolution process
- Any penalties for an inadequate service
An example of a Service Level Agreements is Aruba's. Depending on what you want, there are several templates you can choose from, to get you started. These templates are available online, some are even free and customisable. When writing any type of SLA, the following points need to be considered:
- Choose reliable performance indicators which encourage the right behaviour.
- Set reasonable and attainable goals or performance levels.
- Ensure that the metrics reflect factors within the service provider's control.
- Go for measurements that can be collected easily.
- Define the SLA clearly and with care.
- Any key performance indicators need to be agreed with the client.
- Consider legal advice when drafting the SLA.
4 sites to get free legal documents and templates like a service level agreement
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