A Policy may be defined as a statement or general understanding, which provides guidance for decision-making to members of an organisation in respect of any course of action. Personnel policies are intentions of the management with respect to manpower management in the organisation. Personnel policies indicate the objectives or the established course of action to establish management's relation with the employees of the organization. A Policy is formulated in the context of organisational objectives. A Policy may be in writing or it may have to be interpreted from the branch of organisation members particularly people at the top.
Policy is formulated through various steps in the decision making process.
A Policy provides guidelines to the members in an organisation for choosing a course of action. Thus policy restricts their freedom in choosing their action. Policy statement should be positive, clear and easily understood. Details regarding maintenance of Industrial relations i.e., notice period for strikes and lockouts, rules for declaring strikes and lockouts as illegal. Such as education, entertainment, canteen facilities, financial assistance, profit sharing, Provident Fund, compensation for accidents .