What is a Service Level Agreement SLA? Explanation and usage

What is a Service Level Agreement (SLA)? It is the measurable quality appendix to a service agreement, in which you define the service level the supplier must achieve: availability (uptime, for example 99.9 percent), response and resolution times per priority class, maintenance windows, and reporting. And, at least as importantly, which service credits or penalties apply if the supplier fails to meet the standard. An SLA therefore does not stand alone, but is part of a main agreement and makes the agreed quality verifiable.

The short answer

• An SLA is a supplement to or appendix of a main agreement, not a standalone contract.
• The core consists of measurable service levels: uptime, response times, and resolution times.
• If the standard is not met, service credits or fines as a financial incentive.
• The underlying service is usually a contract for services (Art. 7:400 BW).
• Everything you agree upon must measurable and verifiable , otherwise it is empty talk.

What exactly is a Service Level Agreement SLA?

A service level agreement is a written agreement regarding the level of service. The English term has become common in Dutch business practice. In an SLA, you translate vague promises (“we provide good service”) into concrete, measurable standards. Examples include a guarantee of 99.9 percent availability per month, a response to an outage within 30 minutes, and repair within 4 hours in the event of a critical error.

The difference compared to a standard service level agreement lies in its measurability. An SLA specifies not only what the supplier does, but also how to measure it, over which window, and what happens if the standard is not met. Without these three elements, an SLA is of little value.

What service levels are included?

The content of an SLA revolves around a limited number of measurable agreements:

• Availability (uptime). Often expressed as a percentage per measurement window, for example, 99.9 percent per calendar month. Important: document how you calculate uptime and what you exclude from the measurement (planned maintenance usually does not count).
• Response time. The time between reporting a problem and the first substantive response. This is not the same as the resolution time.
• Resolution time. The time within which a fault must be resolved. Increases by priority class: a critical fault has a shorter window than a cosmetic defect.
• Maintenance windows. Fixed times during which the supplier is permitted to perform scheduled maintenance without this counting as downtime.
• Reporting. How and how often the supplier reports on the levels achieved, so that you can verify the standard.

Uptime and response times in practice

Consider an e-commerce platform that has its webshop hosted. The shop earns money every hour, so downtime is a direct loss. In the SLA, the platform requires 99.9 percent uptime per month. That seems high, but 99.9 percent allows for approximately 43 minutes of downtime per month. If you want to be stricter, you agree on 99.95 percent (approximately 22 minutes) or higher.

The platform records response times in a table by priority class. A critical outage (the shop is unreachable) receives a response within 15 minutes and restoration within 2 hours. A high priority (checkout malfunctioning) receives a response within 1 hour and restoration within 8 hours. A low priority (a text error in the administration screen) may be addressed within 2 working days. This way, everyone knows in advance what “fast” means.

Service credits: what if the standard is not met?

The cornerstone of any serious SLA is the penalty for underperformance. The most commonly used form is the service credit: if the supplier fails to meet the uptime standard, the customer receives a discount on the invoice. In the example, the compensation drops by a fixed percentage for every tenth of a percentage point that the uptime falls below 99.9 percent.

Legally, such a service credit or penalty is often a penalty clause. This means that the court can reduce the amount pursuant to Article 6:94 of the Dutch Civil Code if the consequences turn out to be unreasonable. Therefore, agree on realistic credits that are proportionate to the damage. Also note: is the service credit the only remedy, or do you also retain the right to compensation and termination in the event of structural failure? That makes a big difference.

Difference from the main agreement

An SLA regulates the quality level, but not the foundations of the collaboration. Price, duration, termination, liability, intellectual property, and the processing of personal data belong in the main agreement. The SLA is the appendix attached to it, which you fill in with measurable standards. If you change the service, you adjust the SLA without reopening the entire contract.

This setup only works if both documents align. An SLA that suggests stricter liability than the main agreement permits leads to confusion and disputes. Therefore, always align the two.

Honest recommendation

For a small, low-risk service with limited financial impact, you often do not need a lawyer: a clear agreement regarding uptime and response times, included in the main agreement, suffices. Even if your supplier offers a reasonable standard SLA that you only want to understand, common sense will suffice. A lawyer only becomes necessary once the service is business-critical, when service credits or penalties are involved, or when you offer an SLA to customers yourself. In those cases, you want the standards to be measurable, the credits legally sound, and the appendix to align neatly with the main agreement.

Want to read more? View the Service Level Agreement (SLA), or read how to drafting a Service Level Agreement SLA and what it costs to have a Service Level Agreement SLA drafted.

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