Lesson 1, Topic 1
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1.3 Service Level Agreement (SLA)

ryanrori June 11, 2020

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A service-level agreement is a negotiated agreement between two or more parties, where one is the customer and the others are service providers. This can be a legally binding formal or an informal “contract” (for example, internal department relationships).

It is now widely accepted that service provision and receipt should be governed by an agreement. This agreement is called a Service Level Agreement or SLA.

This is essential to define the parameters of the service, for the benefit of both the provider and the recipient. It must obviously cover many other issues, as well as defining the service itself.

It is important to establish[1] service levels that are appropriate to your company’s business and that are customary in the applicable industry. While many facets of a supplier’s performance can be measured, focusing on those items that are uniquely business-critical for your organisation will provide the best evaluation of service quality. In addition, it is best to choose service levels that you can easily measure on an objective basis. By focusing on a limited number of clearly defined key metrics that lend themselves to uncomplicated measurement, the parties are able to keep the time and expense in administering the service levels to a minimum and reduce the likelihood of disputes over whether the supplier met them.

Purpose of SLA in a Contact Centre and BPO environment

While outsourcing contact centre facilities has the potential to reduce costs and improve service, positive results are by no means a certainty because buyers inherently give control over the contact centre to a third party. To improve the likelihood that you will achieve your goals, it is critical to establish appropriate service level agreements (SLAs) with the outsourcing supplier. By establishing appropriate SLAs up front in your contract with the supplier, you more clearly define the levels of performance the contact centre operator is obligated to meet, as well as your rights and remedies in the event the supplier does not achieve those levels. These SLAs increase the probability that the operation of the contact centre will meet your expectations.

Service level agreements for a Contact Centre or BPO can contain numerous service performance metrics with corresponding service level objectives. Typical call centre service levels include:

Average Speed of Answer

This service level measures the average speed in which agents answer calls. By requiring the supplier to answer calls within a given period of time (such as 20 seconds), the company reduces customer dissatisfaction since they won’t spend a lot of time on hold at the outset of the call. Often, the parties agree to exclude “abandoned” calls (where the customer hangs up in a shorter period of time).

Percentage of Calls Answered

This service level measures the percentage of inbound calls agents answer. By requiring the supplier to answer at least a set percentage of inbound calls, the company increases the likelihood that the overall abandonment rate remains low. As with the average-speed-of-answer service level, the parties often agree to exclude abandoned calls.

Hold Time

This service level measures the total amount of time a customer spends on hold. The measurement includes initial hold time (i.e. before the call is first answered) as well as the time in which a customer is placed on hold after initially speaking with a customer service representative. This service level can be important because customer satisfaction is significantly reduced if they are placed on hold for long periods during the course of the call.

Handle Time

This service level measures the total amount of time it takes an agent to handle a call. By requiring a supplier to maintain an average handle time below a certain threshold, the company not only increases the likelihood of customer satisfaction but also increases the likelihood that the customer service representatives are handling calls efficiently.


This service level measures the amount of time agents spend handling calls. This measurement is particularly relevant in call centre deals where the fees paid by the company to the supplier are related to the number of customer service representatives employed by the supplier at the call centre facility. By requiring customer service agents to be occupied with phone calls for a specified amount of time, the company increases the likelihood that the call centre is appropriately staffed and that the company is not being over-billed.

Once the parties agree on which facets of the supplier’s performance to measure, the next step is to reach agreement on the levels of performance that need to be met. Typically, the service levels strike a balance between the customer’s needs and the supplier’s capabilities. When negotiating base service levels, push for performance standards that meet or exceed your expectations. At the same time, understand the supplier will evaluate whether it can meet the proposed performance standards with its call centre technology and resources. Remember the supplier needs to operate the call centre at a profit.

Agree Upon Form, Format, and Frequency of Reports

In order to track the supplier’s performance, you need to have access to periodic reports of the service level measurements. The parties should agree up front on the form, format, and frequency of these reports. Though reporting structures will vary depending upon the complexity of the reports and the company’s needs, service level reports are most commonly provided to the company in electronic format on a monthly basis. To the extent possible, however, it is wise to request real-time electronic access to the report data.

In summary, while outsourcing call centre operations presents the possibility of reducing call centre costs and increasing the quality of customer service, properly drafted service level agreements increase the likelihood that the supplier will achieve these goals and provide companies with the flexibility to terminate if they are not.

  • Focus service levels on metrics that are most important to the company’s business.
  • Choose objective service levels that can be measured easily.
  • Require the supplier to meet levels of performance that reflect both the customer’s needs and expectations. SLAs should also take into account the technology and resources the supplier is dedicating to the call centre and the economics of the deal.
  • Agree up front on the form, format, and frequency of service level reports.
  • Insist on credits for service level failures that are substantial enough to encourage compliance but not so substantial that every failure turns into a blame game. The incentive for both sides should be to solve problems, not find fault.
  • Insist on the right to terminate in the event of severe or chronic service level failures.

How to Create an SLA

Service Level Agreements[2] are contractual agreements that describe the elements of service to be rendered to an individual or organisation. Within this document is a component that address what the product or service is, who will receive it and how it will be tracked, changed or reported. The document should not be created unilaterally, as the omitted party will not feel obligated to honour the contractual obligations.

  • Begin with context-setting information. Explain the environment, stakeholders, objectives, potential risks and dependencies.
  • Describe the services. Succinctly state the products and services to be rendered providing examples when possible.
  • Establish the service standards. Describe what constitute exemplary, satisfactory and poor service. Give details of each level in terms of response, delivery and resolution.
  • Define service tracking and reporting. Establish the policies and procedures for tracking the consumption of services, end user reporting and periodic review of services.
  • Develop a change process. Define the process for logging, tracking, approving and implementing change. Also, define how it will be communicated to stakeholders.

[1] Information from:


[2] Read more: http://www.ehow.com/how_8679194_create-sla.html