What is a Service-Level Agreement (SLA)?
Vendors use service-level agreements to define the scope of their working relationship with a client. Learn what they cover, how they function, and how they protect all parties.
By: James M. Tobin, Edited by: Marie Custodio Collazo
Published: June 9, 2025
A service-level agreement (SLA) is a document vendors use to define the scope of services they will provide to a client. SLAs are common in information technology (IT) and outsourcing, but they are also used in property management, telecommunications, customer service, and many other business contexts.
Explore their importance, learn about different SLA types, and discover how to create one.
Why are SLAs important?
SLAs provide transparency and accountability by protecting the interests of all parties involved in a business relationship. They function as a written record of the specific scope of services a vendor agrees to provide, and as a legal tool for clients who want to ensure they get what they paid for.
Who needs an SLA?
SLAs can apply to any situation where a vendor agrees to provide specific services to a client. They are commonly used by:
- Cloud computing service providers
- Internet service providers
- IT organizations
- Telecommunications companies
Property management companies, external suppliers, and outsourcing firms also use SLAs to define the end-to-end scope of the services they will provide as part of a contractual agreement.
Who writes service-level agreements?
Service providers typically supply SLAs, but in some circumstances, their customers or clients can alter or amend them. Agreements typically undergo expert legal reviews before they are issued or finalized.
Types of SLAs
Vendors use many types of SLAs to define the scope of their services, but three are particularly common:
Customer SLA
A customer SLA defines the scope of services a vendor will provide to one specific client. For example, a cloud hosting provider might use a customer SLA to specify the suite of services it will deliver to a particular company.
Internal SLA
Larger organizations sometimes use internal SLAs to define working arrangements between their divisions or departments. For example, a company may use an internal SLA to define how its IT team will supply its various operating divisions with computer hardware or software.
Multi-level SLA
Multi-level SLAs include multiple service tiers and define differences in the services the vendor will provide to customers at various levels. For example, a software-as-a-service provider may offer a base set of universal services but offer enhanced support and additional features to customers willing to pay more.
What are the components of an SLA?
SLAs have variable components, which depend on the nature of the vendor-client relationship and the services covered in the agreement. However, most agreements include:
Overview
This introductory section defines the basic elements of the agreement, specifies the involved parties, and states the agreement's start and end dates. It can also cover service costs and other compensation-related details.
Service description(s)
SLAs build on the basic service description(s) provided in the overview to explain, in complete detail, exactly what services the vendor will provide to the customer.
Exclusions
SLAs may also explicitly state what is not covered by the agreement. If so, this information usually appears in a dedicated exclusions section.
Stakeholders
The stakeholders component describes which parties are covered by the agreement and the responsibilities each party holds in fulfilling the SLA's terms.
Service performance tracking
This section explains the exact metrics stakeholders will use to determine each party's fulfillment of its roles and responsibilities. It may include a sub-agreement known as a service-level objective (SLO), which specifies a tangible performance goal or target.
Review and adjustment procedures
SLAs may include mechanisms for reviewing contract fulfillment or tracking progress toward performance targets, as well as procedures for adjusting the agreement's scope or terms.
Redress procedures
This section defines the consequences parties may face for failing to abide by the SLA's terms. It may also describe the process for seeking compensation if any signatory fails to meet their responsibilities.
Termination process
SLAs include clauses explaining how signatory parties can end their working relationship, or when and under what terms the agreement will expire.
Signatures
Agreements typically conclude with stakeholder signatures, which represent that signatories understand and accept the full terms of the SLA.
SLAs vs KPIs
SLAs sometimes incorporate metrics known as key performance indicators (KPIs). KPIs allow stakeholders to track, with numerical precision, the vendor's delivery rate toward a stated objective or result.
Service-level agreements usually include key performance indicators when the vendor's performance depends on meeting quantifiable, agreed-upon standards.
How to write an SLA
To create a fully functional SLA, consider following these best practices:
Start with a template
You can find free SLA templates from various reliable sources. Look for templates prepared by legal experts or established industry leaders. However, use your template as a guide, reviewing it carefully and adjusting its content as needed.
Be clear
Clarity is the key to an effective service-level agreement, especially regarding:
- The SLA's purpose and service goals
- The roles and responsibilities of each signatory party
- KPIs and other performance metrics
- Service costs and compensation
You should also create comprehensive and logical steps regarding communication channels and dispute resolution processes.
Set regular assessment intervals
SLAs often operate dynamically, especially in industries like IT and cybersecurity, where best practices and service landscapes constantly evolve. To ensure your SLA is flexible, consider building in regular assessment and review intervals to ensure the agreement continues to work as intended for all parties.
Have an expert review your work
Vendors should always engage an expert to perform a final review of the SLA before releasing the agreement. This is particularly important if you're an independent service provider with relatively little experience.
Consider working with an experienced industry insider or an attorney specializing in contract law.
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