Understanding public vs private sectors

Economies are separated into sectors, with each sector representing a different aspect of economic activity. Organizations belonging to the public sector are generally government agencies that aim to provide services to the public. The private sector represents businesses of ranging sizes, all with the primary goal of generating a profit.

At times, the private and public sectors may blend together and collaborate on projects. Sometimes occurring on a long-term basis, these partnerships can be found in projects such as transportation and infrastructure. These are called public-private partnerships, which are financed by public funds and may grant the private sector business tax concessions, liability protection or partial ownership over public works.

How does the public sector work?

The public sector is composed of government agencies at federal, state and municipal levels. Generally funded by tax dollars, public sector organizations are managed by the government and aim to provide services to the public, such as education and welfare. These organizations aren’t revenue-driven and instead use available tax money to fund operations. Common industries include:

• Police force and other emergency services
• Public education
• Hospitals and public health clinics
• Army and other forces
• Executive departments and agencies

What are public sector employees?

Individuals who work for government agencies are public sector employees. They may be teachers, emergency responders, administrators or other professionals. Public sector organizations provide stable employment to the public, with jobs usually paired with certain benefits packages.

How does the private sector work?

For-profit organizations or businesses not owned by the government generally fall into private sector categorization. These businesses are funded by revenue and can range in size, from large corporate organizations to individually owned and operated businesses. There are many types of businesses in the private sector, such as hospitality, technology or legal services. Private sector businesses mainly form as sole proprietorships, partnerships, corporations or LLCs.

With a focus on entrepreneurial activities, private sector organizations can have lucrative earning potential. Many of these businesses provide similar goods and services and often compete for the attention of consumers. They also have legal barriers and liabilities associated with hiring and laying off employees.

What are private sector employees?

Private sector businesses hire individuals from the public. These roles vary by industries, with common private sector jobs found in manufacturing, hospitality or other non-government industries.

Where do nonprofits fit?

Nonprofit organizations are classified separately from public vs private sector employment. Since these nongovernment organizations promote causes that serve the public, the revenue generated from nonprofits is generally tax-exempt. Labor for smaller nonprofits is performed by volunteers, but large nonprofits may pay wages to employees and must comply with employment regulations.

Differences between public sector vs private sector organizations

Ownership

One of the main dividing characteristics between public vs private sectors is ownership. Private sector businesses are owned and operated by individuals or groups, such as sole proprietors, partnerships or LLCs. Public sector organizations are owned and managed by the government on behalf of public needs and interests.

Goods and services

The government is responsible for providing the public with certain goods or services in exchange for taxes, such as mail service, public infrastructure and national defense operations. These services are provided by the government to ensure that they are equally accessible to all members of the public.

Private sector businesses offer goods or services that are purchased by consumers. For example, partnership businesses may provide legal or accounting services, while sole proprietors usually include plumbers, designers and other contractors.

Employment

Private sector employers are generally subject to the Fair Labor Standards Act and must treat their employees accordingly. The FLSA includes regulations about working hours, minimum wage and meal breaks. Employers may also need to comply with other labor laws, but generally have flexibility in terms of wages and benefits offered.

Public sector employees, called civil service employees, are subject to a separate labor system for government agencies. Their positions may be classified and assigned to certain pay grades to ensure equality across roles and organizations.

Financial operations

Public sector organizations fund operations with government financial support, with some organizations generating revenue in order to maintain operations. In the private sector, businesses fund their operations through revenue, shares, credit or loans.

Hiring employees outside of your sector

In addition to public-private sector partnership collaborations, there are times when employers may opt to hire employees outside of their sectors. For instance, a private sector employer may hire a former public sector employee, while a public sector organization may choose to onboard a former private sector employee. Here are some benefits of hiring outside your sector:

Benefits of hiring public sector employees when you’re in the private sector

Public sector employees such as teachers, emergency responders and police officers have experience working with the public and possess certain interpersonal skills that may benefit your business. For example, hiring a former police officer for a private security position can bring skills and knowledge to help with their performance. If you hire a former teacher for a call center operator or receptionist position, their communication and problem-solving skills can prove to be highly essential.

Benefits of hiring private sector employees when you’re in the public sector

Private sector employees fall under a wide umbrella of positions, including hospitality workers, administrative assistants, retail workers and private therapists. Similar to public sector employees, many private sector employees possess unique skill sets that can benefit your organization. For example, if your organization is seeking someone to work in the local community as a food pantry or soup kitchen manager, an individual with past experience in the hospitality industry will already have experience working in this type of environment.