Types of Breaching Charges in SLAs

When an SLA is violated, the compensation owed isn't arbitrary—it is calculated based on specific formulas written into the contract. Understanding the different types of breaching charges is essential for procurement and vendor management.

1. Tiered Percentage Credits

This is the most common structure for cloud hosts like AWS and Azure. The further below the SLA target the vendor falls, the higher the percentage of the monthly bill is credited.

• 99.0% – 99.9% uptime = 10% credit
• 95.0% – 99.0% uptime = 25% credit
• Below 95.0% = 100% credit

2. Flat Rate Per Hour

Often seen in custom enterprise contracts, this structure charges a fixed dollar amount for every hour the SLA is breached. For example, $500 for every hour of downtime exceeding the allowed limit.

3. Per-Ticket Penalties

Common in help desk contracts, the provider is charged a flat fee (e.g., $50) for every single ticket that breaches the response or resolution SLA.

4. Liability Caps

Almost all contracts include a cap. Even if a vendor is down for two straight weeks, they generally cap total service credits at 100% of that month's invoice.