SLA Breach FAQ

An SLA breach occurs when a service provider fails to meet the performance levels guaranteed in a Service Level Agreement. Common examples include a cloud host falling below a contracted 99.9% uptime, a support desk exceeding its response time target, or a software vendor missing a delivery milestone. Once a breach is confirmed, the contract typically entitles the affected party to a financial remedy — a service credit or direct penalty payment.

The formula is: (Contracted Uptime % − Actual Uptime %) × Total Hours in Period = Downtime Overage Hours. Those excess downtime hours are then multiplied by a penalty rate set in your contract — either a flat dollar amount per hour, or a percentage of that month's invoice. Most contracts cap the total credit at 10–30% of the monthly fee regardless of how severe the breach was.

A tiered structure escalates the penalty rate based on how far below the SLA target performance falls. For example: 99.5–99.9% actual uptime might earn a 10% service credit; 99.0–99.5% earns 20%; anything below 99.0% earns 30%. This is the most common structure in enterprise cloud and managed service contracts. Our calculator's "Tiered (standard SLA)" option uses this widely-adopted structure as a baseline.

Not always. Most commercial contracts award service credits — a reduction in future invoices — rather than cash refunds. However, some contracts (particularly government procurement and large enterprise agreements) require direct financial payment. The distinction matters legally. This calculator computes the monetary value of the entitlement; check your contract to confirm whether it's a credit or a payment obligation.

This tool is designed to help you understand your entitlement and prepare for a formal claim or negotiation. It is not a substitute for legal advice. We recommend using the output as a working document that you verify against the specific penalty language in your contract before submitting a formal claim. For high-value disputes, involve your legal or procurement team.

Industry standard is 10–30% of the monthly contract value, regardless of how large the actual shortfall was. AWS, Google Cloud, and Microsoft Azure all cap SLA credits at around 10–30% of monthly spend. Some managed service providers offer higher caps in their enterprise agreements. If your contract doesn't specify a cap, you may have grounds to claim the full calculated amount — a situation where consulting a lawyer is recommended.

Yes. While the penalty structures vary, the underlying math — comparing actual vs. contracted performance and applying a rate to the shortfall — applies universally across ITIL-aligned service management, ISO/IEC 20000-compliant agreements, and standard commercial IT contracts. Input the specific targets and rates from your agreement to get accurate results.