The Procurement Glossary » Service Credit
Service Credit
Contracts & Legal
Definition
A pre-agreed rebate the supplier gives the buyer when it fails to meet an SLA target.
Explanation
Service credits put money behind SLAs, compensating the buyer and incentivising performance without resorting to termination. They are capped and defined in the contract so both sides know the consequence of a miss.
Example
Missing the uptime SLA for two months triggers a 10% service credit on those invoices.
Related terms
- Service Level Agreement (SLA) — A contractual commitment defining the level of service a supplier must deliver, with measurable targets and consequences for missing them.
- Liquidated Damages — A contractually fixed sum payable by a supplier for a specified breach, agreed in advance as a genuine estimate of the buyer's loss.
- Supplier Performance Management — The ongoing measurement of how well suppliers meet expectations on quality, delivery, cost and service.
Frequently Asked Questions
What is Service Credit?
A pre-agreed rebate the supplier gives the buyer when it fails to meet an SLA target. Service credits put money behind SLAs, compensating the buyer and incentivising performance without resorting to termination. They are capped and defined in the contract so both sides know the consequence of a miss.
Can you give an example of Service Credit?
Missing the uptime SLA for two months triggers a 10% service credit on those invoices.
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