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Project Management guide · Risk, quality and control

Service Level Agreement (SLA): Meaning, Template and Examples

A service level agreement (SLA) is a documented agreement between a service provider and a customer that defines the service to be provided, the measurable levels it must meet, how performance will be reported, and what happens if targets are missed.

Key takeaways

  • An SLA sets measurable service levels, reporting and remedies.
  • Distinguish SLAs, SLOs, SLIs, OLAs and KPIs.
  • Precise definitions matter more than ambitious numbers.
  • Projects that create services should agree the SLA before handover.

Where SLAs appear in projects

  • A project buys a service from a supplier, such as hosting, support or maintenance, and agrees an SLA in the contract.
  • A project delivers a new service that will be run by an operations team, and must define the SLA the business will receive after handover.
  • Internal teams agree service levels with each other, for example IT support response times.

In project terms an SLA is both a procurement tool and a quality standard: it defines what 'good' looks like once the service is live.

SLA, SLO, SLI, OLA and KPI

TermMeaningExample
SLAAgreement with the customer, often with consequences99.9% monthly availability, with service credits if missed
SLO (service level objective)A specific target within or behind the SLA99.95% availability as an internal target
SLI (service level indicator)The actual measurementPercentage of successful health checks
OLA (operational level agreement)Agreement between internal teams that supports the SLADatabase team restores backups within 2 hours
KPIAny key performance measure, not necessarily agreed with a customerCustomer satisfaction score

SLA template

SectionContent
Parties and termWho the agreement is between, start date, duration, review date
Service descriptionWhat is included and excluded
Service hourse.g. 24/7 or 08:00-18:00 Monday to Friday, excluding bank holidays
Service levelsMetrics, targets and how they are measured
Priority definitionsWhat counts as priority 1, 2, 3 and 4 incidents
ResponsibilitiesWhat the provider and the customer must each do
ReportingReport contents, frequency and review meetings
RemediesService credits or other consequences for missed targets
ExclusionsPlanned maintenance, customer-caused faults, events outside the provider's control
Escalation and changeContacts, escalation path and how the SLA itself is changed

Example service levels

PriorityDefinitionResponse targetResolution target
P1 CriticalService unavailable for all users15 minutes4 hours
P2 HighMajor function unavailable or many users affected1 hour8 business hours
P3 MediumSingle user or minor function affected; workaround exists4 business hours3 business days
P4 LowQuestion or cosmetic issue1 business day10 business days

These are illustrative. Real targets should reflect business need and what you are willing to pay for.

Worked example: availability

Availability targets are usually measured over a month. In a 30-day month there are 43,200 minutes, so:

Availability targetAllowed downtime in a 30-day month
99%432 minutes (7.2 hours)
99.5%216 minutes (3.6 hours)
99.9%43.2 minutes
99.99%About 4.3 minutes

If a provider had 90 minutes of unplanned downtime in a 30-day month, availability was (43,200 - 90) / 43,200 = 99.79%. That meets a 99.5% SLA but misses 99.9%. Whether planned maintenance counts as downtime depends on the exclusions you agreed.

Tips for setting SLAs

  • Measure what users care about, such as successful transactions, not just whether a server is switched on.
  • Make definitions precise: when does the clock start and stop, and in which hours?
  • Check that internal OLAs and supplier contracts support the SLA you promise.
  • Avoid targets you cannot measure.
  • Review SLAs regularly and capture issues as lessons learned.
  • Include SLA readiness in the handover criteria at project closure.

Free templates for this topic

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Frequently asked questions

What is a service level agreement?

A documented agreement between a provider and a customer setting out the service, measurable targets, reporting and consequences for missing targets.

What should an SLA include?

Service description, hours, measurable service levels, priority definitions, responsibilities, reporting, remedies, exclusions and escalation.

What is the difference between an SLA and an SLO?

An SLA is the agreement with the customer; an SLO is a specific target, often stricter, used to manage the service internally.

What is the difference between an SLA and an OLA?

An SLA sets commitments to the service's customers; an OLA is an operational level agreement between internal teams that supports those SLA commitments.

What is a service credit in an SLA?

A refund or discount the provider gives the customer when agreed service levels are missed.

How much downtime does a 99.9% availability SLA allow?

About 43 minutes in a 30-day month, or roughly 8.8 hours over a year.

What is the difference between response time and resolution time in an SLA?

Response time is how quickly the provider acknowledges and starts work on an incident; resolution time is how quickly it is fixed or a workaround is in place.

Is an SLA legally binding?

When it forms part of a contract with an external supplier it usually is. Internal SLAs between departments are generally not legal contracts.

Who is responsible for monitoring an SLA?

Usually the service owner or supplier manager on the customer side, using reports from the provider.

What is the difference between an SLA and a KPI?

An SLA is an agreement that contains targets; a KPI is any key measure of performance, which may or may not be part of an SLA.

When should a project define the SLA for a new service?

During planning and design, because service levels affect architecture, staffing and cost, and they should be agreed before handover.