What Is The Difference Between Private And Public Sector?

Updated 30 September 2022

When candidates search for employment opportunities, they usually consider jobs in both the public and private sectors. While the public sector provides services to the general public, the private sector focuses on the interests of individual organisations and entities. Learning about each sector and its advantages can help you determine which of the two sectors suits your career goals and interests better. In this article, we examine the definitions of public and private sector undertakings along with examples and discuss the primary differences between the two.

What Is The Difference Between Private And Public Sector Enterprises?

Although there is a significant difference between private and public sector enterprises, they often partner to achieve common goals, such as investment in construction, infrastructure or transportation projects. The primary differences between these two sectors pertain to these attributes:

Ownership

The most significant difference between the private and public sectors is the ownership of organisations. In the public sector, the Government of India or a state government owns and controls the operation of member organisations. Government ownership, control and management may be complete or partial. In contrast, individuals or private companies own and operate private sector enterprises.

Purpose

Some state-owned enterprises may participate in commercial activities and make a profit. But, organisations in the public sector tend to serve the primary purpose of benefiting the public by providing services. Some examples of public sector enterprises include military, law enforcement and public transit. Businesses typically pursue profit and growth as a primary goal in the private sector.

Financial support

Organisations in the public sector receive financial support and funding from the government. These funds may come from direct and indirect taxes collected from the public. Some public sector organisations generate revenue through commercial activities like the sale of products and services. In the private sector, organisations may receive some financial support from external entities like banks and investors. Usually, they fund themselves using internal revenue, initial public offerings (IPOs) or loans.

Remuneration

Employees working in the public sector either work for public agencies or local, state or federal governments. Institutions in this domain usually use government funds to pay their employees. Individuals work for a privately-owned business or a publicly-traded company in the private sector. A portion of the business' profits goes towards remunerating employees.

Typical industries

The public sector focuses on public goods and government services, so its employment areas include public education, defence, public transit and infrastructure. Individuals can also find employment in the government, whether as a civil servant or politician. The private sector focuses on making a profit, so its scope is more extensive and diverse. Some examples of industries in which private entities dominate include financial services, hospitality, real estate and technology.

Advantages Of Working In The Public Sector

The public sector represents a part of the economy that the government owns and operates. Organisations in this sector try not to seek profit and focus on providing public services to the government's citizens at affordable or subsidised rates. The primary objective of a public enterprise is providing cheaper goods and services to a general population.

The public sector includes central government bodies, state government entities and even local government authorities. This sector has two types of organisations, based on the extent of government control. Some enterprises may be under the total control of government authority, while others may receive partial aid or assistance. Parliamentary procedures help form most large public sector organisations. Some advantages of working in the public sector include:

Job security: Employees in the public sector may experience more job security. These employees provide services that are in high demand, and this ensures job safety.
Benefits: Individuals who work for government agencies or departments often receive attractive benefits packages. Health insurance and retirement benefits are examples of add-on benefits.
Job satisfaction: Some people may enjoy working in the public sector because it allows them to serve the community. Rather than pursuing profit or fame, they may want to contribute to the betterment of society at large.

Types Of Public Sector Enterprises

These are the main types of public sector enterprises:

Government agencies: A government agency receives resources, assistance and funds from the government and is responsible for managing and performing specific tasks. This group contains national, state and city-level agencies.
Public purpose corporations: A public purpose corporation serves the public in a way similar to a non-profit organisation. Public libraries are examples of public purpose corporations under the purview of state governments.
Public authority: A public authority is similar to a public purpose corporation but has more power and often manages infrastructure-related projects. For example, a city council may maintain a housing authority to provide affordable housing to its residents.
State-owned enterprises: A state-owned enterprise is under the purview of a state or the central government and participates in commercial activities on behalf of the government. The government may have full or partial ownership of such businesses.

Advantages Of Working In The Private Sector

The private sector represents the part of the economy that individuals and for-profit companies own and operate. This sector comprises many companies with different sizes, purposes and functional capabilities. It includes many small and medium enterprises that operate within national boundaries and large companies with an international scale of operations. The government can also privatise public sector enterprises if required. Brand reputation, growth and market share are usually the top priorities for private sector enterprises. Typically, private businesses provide a larger portion of the jobs in any economy.

Some of the most prominent private sector enterprises include educational services like private schools, colleges and universities, telecommunication services, financial services and IT services. These enterprises follow the government norms and regulations, even though they may not fall under the direct purview of the government. Some of the advantages of working in the private sector include:

Career growth opportunities: Private sector employees typically get more opportunities for career advancement as their performance and skills are the most significant determinants of the same. In the public sector, professional growth may depend on government policies and rules rather than the performance of an employee.
Higher salary potential: Private sector employees receive more opportunities for pay raises, promotions and salary increments compared to their public sector counterparts. The primary reason for this is that some high-level public sector jobs have income caps, while private-sector jobs do not.
Diversity of job roles: The private sector offers greater diversity in job opportunities, allowing individuals to find work based on their varying interests. The public sector has agencies and organisations which focus on providing specific public services and limited options for employment.

Types Of Private Sector Enterprises

The private sector comprises many different types of businesses. Some examples include:

Sole proprietorships: A sole proprietorship is an unincorporated business that an individual owns and operates. The proprietor may assume the designation of chief executive officer or director and supervise the working of several departments.
Partnerships: A partnership is a business that two or more individuals own and operate. For example, a law firm may have several partners that co-own it and share the profits.
Small and mid-sized enterprises: A small or mid-sized enterprise falls within a certain range in parameters like revenue, assets and number of employees. Different countries and industries specify different ranges and parameters to classify enterprises as small or mid-sized.
Multinational corporations: A corporation represents a legal entity separate from its owners, such as a large corporation typically earning a taxable income. A multinational corporation has operations and assets in more than one country.
Professional trade associations: Professional trade associations serve specific groups of people, typically based on their profession or industry. They often offer their members professional services, training programmes, communication platforms, events and networking opportunities.
Trade unions: Trade unions are collectives that individuals working in the same industry or company form to safeguard their personal and professional interests. Trade unions or the leaders of trade unions negotiate with company representatives or government officials to ensure that employees receive favourable working conditions, reasonable wages and labour rights.

Please note that none of the companies mentioned in this article are affiliated with Indeed.

What Is The Difference Between Private And Public Sector?