What is a Service Level Agreement (SLA)?

A service level agreement (SLA) is a documented contract that defines the expected level of service between a provider and a customer. It outlines measurable performance metrics, such as response and resolution times, availability, and responsibilities.

A service level agreement usually describes the parties involved, the nature of service rendered, quality or performance metrics for the services, how and when the contract may be terminated, and, as mentioned above, how to fix issues with service quality. 

SLAs are a key part of Service Level Management (SLM), ensuring that IT services align with business needs. IT service providers, including internal IT teams and external vendors, must track SLAs to measure performance, maintain accountability, and meet contractual obligations. Their primary purpose is to set clear expectations, prevent misunderstandings, and provide a framework for continuous service improvement.

Why are service level agreements important?

SLAs ensure that both clients and the service providers understand the exact nature and quality of service to be rendered. 

From a client’s perspective, an SLA guarantees that the requested services will be delivered; it assures the client that they will fit their requirements. The SLA dictates the standards for every service provided and how these standards will be measured. 

From a service provider perspective, the SLA ensures clear communication between them and the client. It removes (to a large extent) ambiguity between client expectations and what the service provider understood. It reduces the possibility of a dispute over services delivered, and if a conflict does occur, the SLA offers remedial mechanisms. 

The document also dictates the deliverables from the client’s end as well. It dictates the elements or resources, such as different documents, access credentials, information, and other resources the service provider may need to deliver the services.

5 benefits of SLAs

SLAs help organizations track performance and improve service quality over time. Here are some of their benefits:

1. Clear expectations: Both service providers and customers understand performance standards and responsibilities.
2. Improved accountability: Defined metrics and penalties ensure providers deliver on their commitments.
3. Better service quality: Regular tracking of SLA metrics helps maintain and improve service performance.
4. Dispute resolution: SLAs provide a reference point to resolve disagreements over service issues.
5. Stronger customer relationships: Reliable service builds trust and satisfaction, leading to long-term partnerships.

How do SLAs work?

SLAs function as binding agreements that define service expectations, tracking performance against measurable criteria. Their effectiveness depends on how they are structured, monitored, and enforced throughout the service lifecycle.

SLAs are tracked using Service Management platforms that log and measure incidents, requests, and performance metrics. Each service commitment — such as response time, resolution time, or uptime — has an associated timer that starts and stops based on predefined conditions.

• SLA timers: When a request or incident is logged, an SLA timer starts running. If the SLA defines a 15-minute response time, the timer counts until the service provider acknowledges the request.
• Multiple SLA stages: Some SLAs have separate timers for different stages, such as response, investigation, resolution, and closure. Each stage can have independent targets.

Many IT services involve different teams, such as Level 1 (L1), Level 2 (L2), and Level 3 (L3) support. The SLA must account for transitions between these teams.

• SLA reassignment: If an issue is escalated, the SLA may either continue running or reset based on predefined rules. For example, an internal SLA between L1 and L2 may allow 30 minutes for escalation.
• Clock pausing: Some SLA policies allow "pausing" when waiting for customer input or third-party responses, preventing unfair penalties for delays beyond the service provider’s control.

SLA compliance is monitored both internally (by the service provider) and externally (by the customer). This ensures transparency, tracks performance, and holds teams accountable for meeting service commitments.

Internally, this includes:

• Real-time tracking: Service managers receive automated notifications when an SLA is at risk of being breached, allowing them to take corrective action.
• Performance dashboards: Internal teams analyze trends, ensuring SLAs remain realistic and achievable.
• Incident reviews: Regular assessments help improve workflows and address bottlenecks that affect SLA compliance.

Customers need visibility into SLA performance to ensure services are delivered as promised. External reporting varies based on contract terms but typically includes:

• Self-service portals: Many ITSM platforms allow customers to check SLA progress in real-time. They can see whether tickets are within compliance, pending action, or past due.
• Automated SLA reports: Monthly or quarterly reports summarize performance metrics, highlight missed SLAs, and provide insights into service trends.
• Review meetings: Some contracts include scheduled SLA review meetings where providers and customers discuss performance, potential issues, and service improvements.

What is included in a Service Level Agreement?

The exact components of a service level agreement may vary between service providers, industries, and the clients' specific requirements. ´There are many guidelines on how to build an SLA. 

That said, most of them follow a general pattern. These are the six main aspects of an SLA:

1. A description of the services
2. The service levels for each of them
3. How the services will be monitored and assessed
4. Service Management
5. Remedial measures in case the provider was unable to meet the specified levels
6. When and how the SLA may be terminated or renewed

Besides these components, customers or service providers may add additional elements, such as the goals of the parties involved (for a general good faith interpretation of the SLA) or situations in which the SLA doesn’t apply or is wholly voided. 

Service level agreement types

SLAs come in different forms depending on the relationship between the service provider and the recipient. Here are the main types:

• Customer-based SLA: Covers all services provided to a specific customer under a single agreement.
• Service-based SLA: Applies the same service commitments to all customers using a particular service.
• Internal SLA: Defines service expectations within an organization, typically between departments.
• Cloud SLA: Specifies service expectations for cloud-based solutions, focusing on uptime, performance, and data management.
• Multi-level SLA: A layered approach that breaks down commitments into different levels:
  • Corporate level: General SLA policies that apply across the organization.
  • Customer level: Specific commitments for a particular customer or department.
  • Service level: Guarantees for a specific service within that agreement.

How to create an SLA? Implementing service level agreements

Creating a service level agreement (SLA) requires a structured approach to ensure it aligns with business needs and service capabilities. A well-defined SLA helps set clear expectations, measure performance, and maintain accountability. Here’s how to implement one effectively.

1. Define the scope and objectives

Start by identifying which services the SLA will cover and what the business expects from them. Define the agreement’s purpose — ensuring uptime, response times, or service quality. Be specific about who the agreement applies to, whether it’s between an IT team and internal departments (internal SLA) or between a company and its customers (external SLA).

2. Outline service expectations and responsibilities

Document the exact services covered, along with performance metrics. This includes:

• Availability: Define uptime guarantees (e.g., 99.9% availability).
• Response and resolution times: Set expectations for issue acknowledgment and resolution based on priority.
• Support hours: Clarify when support is available (e.g., 24/7 or business hours only).
• User responsibilities: Specify any actions required from customers, such as reporting issues through a specific channel.

3. Set measurable performance indicators

Use key performance indicators (KPIs) to track whether the SLA is being met. Common metrics include Mean Time to Respond (MTTR, Mean Time to Resolve (MTTR) or First Contact Resolution (FCR).

4. Define escalation procedures

Not every issue can be resolved within the agreed timeframe. Establish clear escalation paths for incidents that exceed SLA limits. Specify who should be contacted at each escalation level and the expected response at each stage.

5. Determine penalties and rewards

Include consequences for failing to meet SLA commitments, such as service credits or penalties. In some cases, agreements may also include incentives for exceeding performance expectations.

6. Review and validate the agreement

Before finalizing, ensure that all stakeholders—business leaders, service providers, and end-users—review the SLA. It should be realistic, achievable, and aligned with business goals.

7. Monitor and adjust regularly

SLAs are not static. Continuously monitor performance through service level management (SLM) practices. Periodic reviews help adjust expectations based on business needs, technology changes, or recurring service issues.

Service level agreement examples

To make SLAs effective, they need to be clear, measurable, and aligned with business needs. Below are some practical examples:

• Incident response time: "The IT support team will acknowledge high-priority incidents within 15 minutes and resolve them within 4 hours."
   
• Service availability: "The system will maintain 99.9% uptime per month, excluding scheduled maintenance."
   
• Support request resolution: "All employee account access requests will be fulfilled within one business day."

A vague or unrealistic SLA can cause confusion and unmet expectations. Here’s an example of a poorly written SLA:

• "We will respond to all requests as soon as possible and resolve issues quickly."

This lacks specific timeframes and measurable targets. Instead, a proper SLA should include clear commitments:

• "Customer support will respond to inquiries within one hour during business hours and within four hours outside of business hours."

SLA metrics

To measure performance effectively, organizations track specific SLA metrics that reflect service quality and efficiency. Here are some of the most common ones:

• Mean Time to Respond (MTTR): The time taken to acknowledge an issue after it is reported.
• Mean Time to Resolve (MTTR): The average time required to fix an issue fully.
• First Contact Resolution (FCR): The percentage of issues resolved on the first interaction without further follow-up.
• Uptime percentage: The amount of time a service remains available, usually measured monthly (e.g., 99.9% uptime).
• Resolution SLA compliance: The percentage of incidents resolved within the agreed timeframe.
• Average resolution time: The typical time it takes to close a support request, providing insight into service efficiency.
• Escalation rate: The percentage of issues that require escalation beyond the initial support level.

SLA fulfillment: What happens if an SLA is not met?

When an SLA is not met, the service provider is held accountable for the failure. The consequences depend on the terms outlined in the agreement. A well-defined SLA should outline how breaches are handled, ensuring both parties understand their rights and responsibilities.

Common outcomes include:

• Service credits: The provider compensates the customer by offering discounts or free service periods based on the extent of the failure. 
  • Proportional credits: Customers may receive a discount or additional service time based on the severity of the failure.
  • Fixed financial penalties: Some SLAs outline flat-rate financial penalties for missed commitments.
• Contract renegotiation: If SLA breaches become frequent, customers may demand contract adjustments, stricter penalties, or improved service guarantees.
   
• Loss of trust and reputation damage: Repeated SLA violations can harm the provider’s credibility, leading to lost business and damaged relationships.
   
• Termination rights: In severe cases, the contract may allow the customer to end the agreement without penalties if SLAs are consistently unmet.

Best practices of service level agreements

No single SLA template works for all, but here are some best practices you can follow while creating an ITSM SLA. 

1. Make your SLAs SMART

SMART means Specific, Measurable, Attainable, Relevant, and Time-bound. So, ensure the SLA has concrete goals, not vague or subjective statements. If the service provider has met the objectives of the SLA, it should be possible to measure performance. You want to ensure that the SLAs help your business grow. 

Also, remember not to overcomplicate SLAs unnecessarily. Use plain language and avoid jargon. Simple SLAs are understood and referred to; complicated SLAs create confusion and are left behind. 

2. Align metrics with business objectives and goals

SLAs should be realistic and aligned with both business needs and operational capabilities. Setting arbitrary deadlines — whether too strict or too lenient — undermines their purpose.

An SLA that is impossible to meet leads to constant failures, eroding trust, and demotivating teams. On the other hand, an SLA that is too easy to achieve provides no real value and fails to drive improvement. The goal is to find a middle ground: commitments that challenge the service provider to maintain high performance while remaining achievable.

“SLAs are not meant to be weapons. If you’re punishing analysts for missing targets, they’ll find ways to game the system—and that’s when you lose sight of the bigger picture.”

Linda Lenox, Senior Technology Operations Leader

Episode 96 of Ticket Volume

Since SLAs are meant to support Continual Service Improvement (CSI), they should be reviewed regularly and adjusted based on performance data, customer feedback, and evolving business needs. A well-balanced SLA fosters accountability and helps organizations enhance service quality over time.

3. Don’t go for one single SLA for all of your services and customer types

Different services have different specifications, and customers have different requirements. You need other metrics for various services. While you can keep a general SLA template, you must tailor it for individual requirements. You don’t want to use the same SLA for cloud services and IT support. 

Developing multi-level service agreements may be a good idea if your business offers multiple services or serves various types of customers. This way, you can standardize these to a large extent and customize them as needed. 

4. Complement SLAs with XLAs

Combining SLAs with XLAs provides a more complete picture of service performance. Service level agreements (SLAs) define measurable performance metrics, but they don’t always reflect the user experience. Experience level agreements (XLAs) fill this gap by focusing on how users perceive service quality.

While an SLA might guarantee 99.9% uptime, that doesn’t mean employees or customers are satisfied with response times or issue resolutions. XLAs track factors like user satisfaction, service efficiency, and overall experience, ensuring that IT services meet both technical and business expectations.

"Whatever you learn is most important to people and impacting their overall sentiment is going to be in your XLA. (...) Let's elevate it to a higher level and let's all know how we're actually impacting that end-to-end experience. And that's where the XLAs come in and give you visibility to that. And a lot of times it changes how many SLAs you have or what's on your SLAs. It's the new evolution of hearing the service experience. We can still keep our blessed SLAs and track service levels. [...] But we're going to supplement them. We're going to start listening to what the customers actually care about, what they value, and then you can start measuring that because that's what's important to them."

Rae Ann Bruno (ITIL, metrics, and processes trainer and consultant)

Episode 4 of Ticket Volume Podcast

InvGate Service Management’s SLA software capabilities

InvGate Service Management is a flexible, no-code Service Management solution for mid-size and enterprise organizations. Included among its features is a visual SLA Management connected with AI capabilities for agents and service providers.

InvGate Service Management provides you with:

• A visual indicator directly on the ticket to see if you've met, paused, or exceeded Service Level metrics.
• The option to configure different SLA policies for multiple departments, not just IT.
• The ability to create customizable dashboards and reports to monitor SLAs.
• The AI-powered feature “Smart Request Escalations” to prevent service level agreement breaches.