What is the difference between the Public and Private Sector?

What is the private sector?

The term ‘private sector’ refers to businesses that have no affiliation to the government and that are privately owned, operating on a for-profit basis. As a business owner, you most likely fall into the private sector. It is thought that there are in the region of six million private sector businesses in the UK, employing more than 27 million people between them.

What are private sector businesses?

Almost any business can be a private sector company, with examples including:

• Digital media companies
• Accountancy firms
• Hospitality and catering businesses
• Retail and e-commerce companies
• Manufacturing and construction firms
• Healthy and beauty businesses
• Technology and software developers

There are many other types of industries that fall into the private sector, but these are just a few of the options.

What is the public sector?

In contrast to the private sector, the public sector is comprised of businesses that are owned, controlled and funded by the government. In the UK, approximately 5.3 million people are employed in the public sector.

What are public sector businesses?

In the UK, examples of public sector businesses might include:

• The NHS (the single biggest employer with more than 1.3 million staff working for it)
• Housing authorities
• The BBC
• The Armed Forces
• The Bank of England

The government also employs a multitude of staff across the social care, emergency services, refuse collection, education and law enforcement sectors.

Can the private sector be employed by the public sector? 

On occasion, public sector organisations will employ the services of the private sector. Examples might include:

• Hiring a private sector company to provide technology, equipment and supplies
• Employing private companies to do the construction or decorating work in public buildings
• Using private sector accommodations as a base for travelling public sector employees

Public sector vs private sector job opportunities

There are more private businesses than public sector businesses, meaning there are naturally more job opportunities for people in the private sector than in the public sector. Despite this, there are multiple job roles that can be found across both sectors, including in healthcare, broadcasting, and banking.

The pay grades across both sectors will differ greatly – even for the same job role. The public sector is controlled by the government which means their funding is dependent on government allowances. As public sector businesses are not for profit, they don’t have as much disposable income to bump up wages at a whim. Typically, public sector workers will be employed on pay grades and they will need to work through the different grades to get a pay increase.

A good example of this is the NHS pay band system – the higher the band, the higher the pay, but it takes a while to move through bands. In specific roles like administration, there is only so far you can go, meaning pay may become stagnant at some point.

One benefit, though, is that public sector employees tend to be offered more comprehensive pay packages and benefits, though this can be mirrored in the private sector. In the public sector, whilst there will be budget constraints, there is far more opportunity to grow profits and have out of cycle pay rises throughout the year. In this sector, businesses set their own salaries. Private companies can use Paydata’s salary benchmarking service to see what employees across the sector are being paid and what they should be looking to pay their employees.

Whilst the pay might differ, the public sector can offer more job stability. There will always be a need for public sector services such as healthcare, local authorities and law enforcement, meaning those employed in the public sector typically aren’t affected by the threat of redundancy or going under due to financial losses.

In contrast, the private sector can be slightly more volatile in terms of job stability, although there are usually more progression opportunities and chances for promotion within one company.