A service level agreement (SLA) plays an important role in any outsourcing contract. It sets clear expectations for the level of service a provider must deliver, acting as a set of agreed targets. If those targets aren’t met, the SLA outlines what happens next. This can involve either next steps to fix the issue, or penalties where appropriate.
What is an SLA?
Whether you’re a business outsourcing key responsibilities or a service provider delivering them, you’ve most likely come across a service level agreement (SLA).
An SLA is a formal contract written in clear language that’s easy to understand. Its purpose is to define realistic expectations and measurable service standards between both parties. If these standards aren’t met, the agreement then explains what action will be taken. Typically, this includes penalties, solutions, or steps for escalating the situation.
Service level agreements can cover a wide range of topics. Generally, they may cover service quality, availability, delivery timelines, and response times. In other cases, they may instead also outline expectations around support and communication.
What are the different types of SLAs?
There are three main types of service level agreements:
- Customer-based – These are tailored to a single customer and focus on the specific services they receive.
- Service-based – A comparably broader agreement that applies to one service delivered to multiple customers.
- Multi-level – The most flexible option. These agreements are usually split into layers, allowing terms to be adjusted accordingly for different users or service levels within the same contract.
Why are service level agreements important?
SLAs help protect both businesses and service providers by clearly defining responsibilities on both sides. They reduce misunderstandings and ensure everyone knows what’s expected of them from the start. They also act as a form of quality assurance. Neither party can demand more than what was agreed, and if standards aren’t met, the contract provides a clear route to resolution or termination.
Service level agreements are also useful for managing any exceptions. For example, if an emergency or unforeseen event prevents one party from meeting their obligations, the agreement can state when penalties won’t apply.
But most importantly, SLAs are integral for keeping your business compliant. Especially if you’re engaging with outsourcing or self-employed workers. There needs to be a clear-cut agreement between your business and any involved parties to ensure they are not treated as employees or otherwise.
The 6 key components of an SLA
Most service level agreements include six core components. Each of them come together to form the foundation of a strong, workable contract.
Stakeholders
This section identifies everyone involved in the agreement. It clearly defines their roles, responsibilities, and any expectations that are set for them during the length of the contract.
Service summary
A short summary at the beginning of the SLA that helps all parties to understand the key terms at a glance. It highlights what’s included, and sets the tone for the rest of the document.
Goals and Key Performance Indicators (KPIs)
This section explains when and how the service must be available. It also outlines any exceptions, such as severe weather, scheduled maintenance, or other agreed limitations.
Sometimes, details on communication channels and response times may also be included. Though that will generally discuss points like phone availability and turnaround times for support requests.
Regular reviews
SLAs should include scheduled review points. These meetings create opportunities for both parties to evaluate performance, discuss the target KPIs, and raise concerns or feedback.
They’re also an opportunity to revisit contract terms, including duration or scope, if any changes are needed.
Service agreement
This tends to be the most detailed section of an SLA. It defines the scope of services, any end-user requirements, and payment arrangements.
It may also review the service provider’s obligations during incidents, expected response times, and how changes to the agreement should be requested, approved, and communicated.
How Wise can support your business with SLAs and compliance
At Wise, we help provide logistics businesses with onboarding, compliance, and payment technology in one simple platform.
Wise provides you with the following tools and support to help you manage your compliance:
- SLA management – Our in-house team of compliance experts can help you draft a new SLA that meets your requirements, or adjust existing SLAs to keep your business compliant.
- Automated SLA reminders – Automate reminders to drivers every 10 months to re-sign their SLAs, reinforcing the self-employment model.
- Automated expiry notifications – Get alerted whenever driver evidences are close to expiring, helping you stay on top of compliance.
- Downloadable audit packs – Make audits a breeze with quick audit packs that can be downloaded in a few clicks.
- Ongoing guidance on compliance and legal updates – Stay in the loop with what’s happening in the industry.
Join Wise today and give yourself peace of mind. Keep your business secure, without the added stress of extra admin.
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