Outsourcing Agreement Template and How to Draft One (2026)

What is an outsourcing agreement, and when do you need one? An outsourcing agreement is the contract under which a company hands a business function, or part of one, to an external provider to run on its behalf. Common examples are business process outsourcing (BPO) such as customer support, finance and accounting or payroll, and IT outsourcing such as application development, infrastructure or help desk. Unlike a one-off services contract, outsourcing usually means the provider takes over an ongoing function for a multi-year term, often using its own people, systems and locations. You need an outsourcing agreement whenever an external provider will run a function for you over time and will handle your data, your customers or your processes to do it. The contract has to cover far more than price: the scope and service levels, the handover of people and assets, how the provider's performance is measured, who owns what, how data and confidentiality are protected, and how you can bring the function back in-house or move it to another provider if things go wrong. Getting the transition and exit terms right is as important as the day-to-day service terms. This article is general guidance, not legal advice. Outsourcing engages contract, employment, data-protection, tax and sometimes regulatory rules that vary by jurisdiction, so have a qualified professional review one before you rely on it. ## Outsourcing agreement template Copy the block below and fill the bracketed fields. ```

OUTSOURCING AGREEMENT This Outsourcing Agreement ("Agreement") is made on [DATE] BETWEEN: [CUSTOMER NAME], [address] ("Customer") AND [SUPPLIER NAME], [address] ("Supplier") 1. SERVICES The Supplier will perform the outsourced function described in Schedule 1 (the "Services") for the Term. Schedule 1 sets out what is in scope, what is excluded, volumes and assumptions. 2. TRANSITION The Supplier will take over the Services under the transition plan in Schedule 2 by [transition end date], including [knowledge transfer, systems access, and any transfer of assets or staff]. 3. SERVICE LEVELS The Supplier will meet the service levels in Schedule 3, with [measurement, reporting frequency] and service credits for misses. Persistent failure to meet service levels is a material breach. 4. CUSTOMER RESPONSIBILITIES The Customer will provide [information, access, approvals and a named contact] the Supplier reasonably needs. Service levels are suspended to the extent a failure is caused by the Customer. 5. CHARGES AND PAYMENT The Customer will pay the charges in Schedule 4 [per month / per transaction / per FTE], plus pre-approved extra work at [rate]. Invoices are payable within [N] days. [Taxes added as required by law.] Charges are reviewed [annually] under Schedule 4. 6. PERSONNEL The Supplier is responsible for its personnel, who are not the Customer's employees. [Key personnel named in Schedule 5 will not be replaced without the Customer's agreement, except for good reason.] [Any transfer of the Customer's staff to the Supplier is dealt with in Schedule 6, subject to applicable law.] 7. DATA PROTECTION AND SECURITY Each party will comply with applicable data-protection law. The Supplier will process the Customer's personal data only on the Customer's instructions, apply the security measures in Schedule 7, restrict sub-processing, and notify the Customer without undue delay of any personal-data breach. 8. CONFIDENTIALITY Each party will keep the other's confidential information secret and use it only to perform this Agreement. 9. INTELLECTUAL PROPERTY Each party keeps its pre-existing IP. IP created specifically for the Customer under the Services belongs to the Customer, and the Supplier grants a licence to any of its own IP the Customer needs to use the output. 10. GOVERNANCE AND CHANGE CONTROL The parties will hold [monthly/quarterly] service reviews. Any change to scope, service levels or charges is agreed in writing through the change procedure before it takes effect. 11. TERM This Agreement runs for [N] years from [START] and renews for [N]-year periods unless either party gives [N] months notice. 12. TERMINATION Either party may terminate for material breach not cured within [N] days, or on insolvency. The Customer may terminate for convenience on [N] months notice [and payment of [early-exit charge]]. 13. EXIT MANAGEMENT On termination the Supplier will carry out the exit plan in Schedule 8: transition the Services back to the Customer or a replacement supplier, return or delete Customer data, and provide reasonable assistance for [N] months. 14. LIABILITY Each party's liability is capped at [cap]. Neither party is liable for indirect or consequential loss. Nothing limits liability that cannot be limited by law. 15. GOVERNING LAW AND DISPUTES This Agreement is governed by the laws of [jurisdiction], with disputes subject to [courts / arbitration seat]. Schedules: 1 Services 2 Transition 3 Service levels 4 Charges 5 Key personnel 6 Staff transfer 7 Security 8 Exit Signed for the Customer: __________ Signed for the Supplier: __________ Name / title / date Name / title / date

- **Service levels (clause 3).** Define the standards, how they are measured, and the service credits for misses, and make persistent failure a termination trigger. This is how you hold the provider to account at a distance.
- **Personnel (clause 6).** Decide whether any of your staff move to the supplier, which can engage employment-transfer law, and protect continuity by naming key personnel the supplier cannot swap out at will.
- **Data and security (clause 7).** Outsourcing almost always means the provider handles your data. Set data-protection duties, restrict sub-processing, require defined security measures, and demand prompt breach notification.
- **Governance and change control (clause 10).** Build in regular service reviews and a written change procedure, so the relationship is managed, not just signed and forgotten.
- **Exit management (clause 13).** This is the clause that protects you if the relationship ends. Require a full exit plan: transition back or to a new supplier, return of data, and assistance for long enough to avoid disruption. ## Common mistakes to avoid - A vague or unrealistic transition plan, so the function breaks during handover.
- Service levels with no measurement or no service credits, so poor performance has no cost.
- Ignoring employment-transfer law when staff move to the supplier.
- No restriction on sub-processing or offshoring of your data.
- No exit plan, leaving you unable to bring the function back or move it.
- A multi-year term with no fee-review mechanism, or auto-renewal with a long notice period. ## A note on jurisdiction Outsourcing rules vary by jurisdiction. In India, the agreement is a contract under the Indian Contract Act, 1872, charges usually attract GST, data handling engages the Information Technology Act, 2000 and the Digital Personal Data Protection Act, 2023, and staff transfers engage labour law. In the UK and EU, employee-transfer rules can apply automatically when a function is outsourced, and regulated sectors such as financial services add outsourcing-specific obligations. Ireland, Singapore, Australia and the US each differ again on data, employment and sector rules. Because outsourcing often crosses borders, treat "varies by jurisdiction" as the honest default and require compliance with the law of each market involved. ## Where a contract workspace helps A template gets you a solid outsourcing agreement. The ongoing work is everything after signing: keeping service levels, charges and exit terms consistent across suppliers, checking each version for weak transition or data terms before you sign, tracking renewal and governance dates, and keeping obligations straight across a long, multi-year relationship. Drafting, reviewing, tracking and governing an outsourcing agreement can live in one AI workspace tuned to how your company contracts, so per-clause risk is shown, service levels or exit terms can be edited in plain language, and key dates and obligations stay in view. [Adira](https://adiralaw.com) is one tool built around a single workspace. This template alone is enough to put a fair agreement in place; a workspace just makes drafting, review and tracking one connected job.