Service credits

Definition

Service credits are fixed deductions from a supplier's fees that apply automatically when agreed service levels in an SLA are not met. They give the client a quick, predictable remedy without the need to prove actual loss and incentivise consistent performance. Contracts typically cap total credits, state whether they are the sole remedy for minor breaches, and clarify their relationship to penalty-clause rules under Dutch law.

Example

If monthly uptime falls below 99.9%, the customer receives a service credit of 5% of that month's fee for each percentage point missed.

Why this is a business risk

Service credits only protect you if you actively track SLA performance and claim them. Many clients never see the credits they are owed because they lack visibility into uptime data or miss the claim window. Conversely, suppliers face unexpected cash-flow impacts if credits accumulate and the cap is hit, potentially triggering a right to terminate for persistent underperformance.

How to manage it

• Define uptime and performance metrics with precise formulas -- exclude scheduled maintenance windows from the calculation or disputes will follow.
• Require the supplier to deliver a monthly performance report so you do not have to chase the data to calculate credits.
• Track the credit cap as a contract milestone -- when it is reached you may have a termination right for persistent underperformance.
• Clarify in the contract whether service credits are the exclusive remedy for the relevant SLA miss or whether damages can also be claimed on top.