Guide
SLA credits: how to calculate and claim them
Short answer
An SLA credit is a reduction in future fees that a provider gives when it misses a service level, such as monthly uptime below 99.9 percent. The contract defines the measure, the tiers, the claim process and the cap. Credits are often the sole remedy, so check whether you can also terminate for repeated failures.
By Pactinel editorial teamReviewed on October 22, 20266 min read
At a glance
| Uptime target | Downtime allowed in a 30-day month | Downtime allowed in a 365-day year |
|---|---|---|
| 99.0 percent | 432 minutes (7.2 hours) | 5,256 minutes (87.6 hours) |
| 99.5 percent | 216 minutes (3.6 hours) | 2,628 minutes (43.8 hours) |
| 99.9 percent | 43.2 minutes | 525.6 minutes (about 8.76 hours) |
| 99.95 percent | 21.6 minutes | 262.8 minutes (about 4.38 hours) |
| 99.99 percent | 4.32 minutes | 52.56 minutes |
These figures are arithmetic: a 30-day month has 43,200 minutes and a 365-day year has 525,600 minutes, and the allowance is the share that is not uptime.
What an SLA credit is
A service level agreement (SLA) sets measurable targets for a service: availability, response time, resolution time, throughput. A service credit is the agreed consequence of missing a target: a percentage of the fees for the affected period is credited against a future invoice. Credits give the customer a prompt, predictable remedy without proving damages. They give the provider a capped, known cost.
Credits are not insurance and rarely cover the customer's real loss. A one-hour outage on a payment system can cost far more than 10 percent of a monthly fee. That is why the surrounding clauses, especially sole remedy, termination rights and the limitation of liability, matter more than the credit percentage.
Anatomy of an SLA credit clause
- Service levels. The metric, for example monthly availability, and the target.
- Measurement. Who measures, with which tool, over which window (calendar month, rolling 30 days), and in which time zone.
- Exclusions. Scheduled maintenance, customer-caused outages, force majeure, third-party networks, beta features. Exclusions can shrink the effective SLA a lot.
- Credit tiers. The percentage owed at each level of failure.
- Claim process. Who claims, within what period, with what evidence.
- Cap. The maximum credit per month, often 30 to 100 percent of the monthly fee for the affected service.
- How credits are applied. Against the next invoice, or paid out at the end of the term. Some contracts forfeit unused credits on termination.
- Chronic failure. A right to terminate if the target is missed repeatedly.
- Sole remedy. A statement that credits are the only remedy for missed service levels.
Calculating a credit
The tiers below are illustrative, not a recommendation. Assume a monthly fee of 10,000 and a 30-day month.
| Monthly availability | Credit (percent of monthly fee) | Credit amount |
|---|---|---|
| 99.9 percent or higher | 0 | 0 |
| Below 99.9 percent, at least 99.0 percent | 10 | 1,000 |
| Below 99.0 percent, at least 95.0 percent | 25 | 2,500 |
| Below 95.0 percent | 50 | 5,000 |
Suppose the service was down for 130 minutes. Availability is (43,200 minus 130) divided by 43,200, which is 99.70 percent. That is below 99.9 percent and above 99.0 percent, so the tier is 10 percent and the credit is 1,000.
Points the clause must settle:
- Unit of measurement. Minutes of unavailability, or failed requests, or error rate over a window.
- Partial outages. Does degraded performance count?
- Fee base. Is the credit a percentage of the fee for the affected service only, or of the whole invoice?
- Rounding. Are minutes rounded up?
- Multiple failures. Are credits for different metrics cumulative, and is there a single cap?
Claiming credits
Many contracts say the customer must claim. Typical rules: a written request within 30 days after the end of the month, with the dates and times, a description and any monitoring evidence. Some providers publish a status page or a monthly SLA report. Do not assume the provider's report is complete; check it against your own monitoring.
Practical steps: keep an SLA register per contract with the target, tiers, cap and claim window; review the provider's monthly report on a fixed date; open a claim when the target is missed; record the credit applied on the next invoice; and note the pattern so that chronic-failure rights can be exercised if triggered.
Sole remedy and termination rights
A sole-remedy clause says credits are the exclusive remedy for missing a service level. The effect is usually to bar damages claims for the same failure. Read it with the limitation of liability, which may cap total damages for all claims. If you can only get credits, a termination right for chronic failure becomes the real protection. A common formulation is failure to meet the target in three of any six consecutive months, or a single month below a severe threshold. Check whether termination is free of exit fees.
Are credits penalties?
Customers sometimes ask whether a credit could be unenforceable as a penalty, and providers whether a large credit could be challenged. The answer depends on the legal system and on how the clause is framed. This table is general information, not legal advice.
| Jurisdiction | Penalty rule in short |
|---|---|
| United States | Under UCC section 2-718(1) for sales contracts, damages fixed in advance must be reasonable in light of the anticipated or actual harm, the difficulty of proving loss, and the inconvenience of other remedies; an unreasonably large amount is void as a penalty. Common law applies similar ideas to other contracts, and states differ. A credit that merely reduces a price for reduced service is typically analyzed differently from a sum payable on breach, but courts look at substance |
| United Kingdom | In Cavendish Square Holding BV v Makdessi [2015] UKSC 67 the Supreme Court recast the penalty rule: it applies to secondary obligations that impose a detriment out of all proportion to any legitimate interest of the innocent party in enforcing the primary obligation. Between commercially sophisticated parties in a negotiated contract the court will give weight to the parties' own judgment |
| Germany | Between businesses, standard terms are reviewed under BGB section 307; the specific bans in section 309 do not apply directly but can inform the review (section 310 paragraph 1) |
| Turkey | Under Turkish Code of Obligations articles 179 to 182, parties may agree a contractual penalty (ceza kosulu) and set its amount freely, and the judge reduces a penalty found excessive on the judge's own initiative (article 182 paragraph 3). Commentary notes that, for merchants, Turkish Commercial Code article 22 generally prevents a merchant from seeking reduction of an excessive penalty, with court decisions allowing it where the amount would cause economic collapse; regional appellate decisions are not consistent. Check current case law |
Common mistakes
- Accepting a credit as full compensation without checking the limitation of liability.
- Missing the claim window. Credits you do not claim are usually lost.
- Ignoring exclusions. A 99.99 percent target with broad maintenance exclusions may be weaker than a 99.9 percent target with narrow ones.
- Relying on the provider's report without independent monitoring.
- No chronic-failure right. Without it, you may pay for poor service for years.
- Cap too low. A 5 percent cap on a critical service does not change provider behavior.
What to negotiate
Measurement by an independent monitor or by shared logs; narrow exclusions; credits applied automatically and without a claim window or with at least 60 days; a termination right for chronic failure, with no exit fee; credits that are not the sole remedy for severe incidents; and a cap that scales with the importance of the service.
How Pactinel helps
Pactinel extracts service-level obligations, reporting duties and claim windows from your contracts with the source text shown, creates a task with an owner for each claim deadline, asks the owner for evidence, and reminds you before the window closes. Reviewers and approvers do not need paid seats. See the free plan. Pactinel organizes the facts and deadlines; it does not give legal advice.
Frequently asked questions
What is an SLA credit?
A service level agreement credit is a contractual discount on a future invoice, expressed as a percentage of the monthly fee, that the provider owes when measured service falls below an agreed level, for example availability under 99.9 percent in a month.
How many minutes of downtime does 99.9 percent uptime allow?
In a 30-day month of 43,200 minutes, 99.9 percent availability allows 43.2 minutes of downtime. 99.95 percent allows 21.6 minutes and 99.99 percent allows 4.32 minutes. Whether planned maintenance counts depends on the definition in the contract.
Are SLA credits automatic?
Often not. Many contracts require the customer to request the credit within a claim window, such as 30 days after the month ends, with evidence of the outage. Missing the window can forfeit the credit, so track claim deadlines.
Are SLA credits my only remedy?
Frequently the contract says so, calling credits the sole and exclusive remedy for missed service levels. Some contracts still allow termination for chronic failure, such as missing the target in three months out of six. Read the remedies clause and the limitation of liability together.
Is this legal advice?
No. This is general information about common drafting and penalty rules. Enforceability depends on the contract, the governing law and the facts, so verify the current rules or consult a qualified lawyer.
Sources
- UCC section 2-718, Liquidation or limitation of damages (Cornell Legal Information Institute) · accessed on October 22, 2026
- Liquidated damages (Cornell Legal Information Institute, Wex) · accessed on October 22, 2026
- Cavendish Square Holding BV v Makdessi, [2015] UKSC 67 (UK Supreme Court case page) · accessed on October 22, 2026
- TBK article 182, Ceza kosulu (commentary and text) · accessed on October 22, 2026
- BGB section 310 (dejure.org) · accessed on October 22, 2026