A shared services agreement is a legal contract between two or more companies, departments, or business units, that outlines the terms and conditions of a shared service arrangement. The agreement defines the boundaries of the relationship between the parties involved and lays out the responsibilities, obligations, and expectations of each party.
Shared services agreements are becoming increasingly popular as businesses seek to streamline their operations and improve efficiency. The idea is to combine resources and expertise to achieve better results than each party could achieve individually. This can apply to anything from IT services to HR, finance, and procurement.
The first step in creating a shared services agreement is to define the scope of the arrangement. This means identifying which services will be shared, who will be providing them, and who will be responsible for paying for them. It`s important to be clear about what is and isn`t included in the agreement.
Next, the agreement should outline the objectives that each party hopes to achieve through the shared service arrangement. This might include reducing costs, improving service quality, or increasing efficiency. Whatever the objectives, they should be measurable and achievable.
Once the scope and objectives have been defined, the agreement should establish the governance structure of the arrangement. This means outlining the decision-making process, defining the roles and responsibilities of each party, and establishing how disputes will be resolved.
The agreement should also cover the financial arrangements of the shared service arrangement. This includes detailing the costs of the services, how they will be allocated between the parties, and how billing and payment will be handled.
Finally, the shared services agreement should address the term of the arrangement and how it can be terminated. This includes defining the notice period required for termination and any penalties or compensation that may be due.
In conclusion, a shared services agreement is a valuable tool for businesses looking to improve efficiency and reduce costs. By outlining the expectations and responsibilities of each party, a well-crafted agreement can help ensure a successful and beneficial shared service arrangement.
