What Is Recompense?

Recompense is the act of awarding a target person, group or entity some form of monetary benefit as a result of the target performing some action, or as the result of some action that has happened to the target. Recompense is one of the main tenets of capitalism, as people perform a task in return for the incentive of wages or other forms of payment.

Recompense may be granted as a reward or as the result of some penalty. As an example, companies may pay its workers with a special cash bonus as a result of workers' efforts that contribute to the company's profits. However, a company may also have to pay out compensation as a result of an injury that happened to the worker as a result of the company's negligence.

Key Takeaways

  • Recompense is the technical term for exchanging monetary payment in return for some action or occurrence.
  • Positive forms of recompense include wages, salary, or bonuses to workers in return for their work.
  • Negative forms include payments that result from workers compensation, lawsuit, or penalties.

Understanding Recompense

Recompense payments award a targeted person, group or entity with some form of monetary benefit as a result of previous actions performed or occurrences of legal loss. Entities often use recompense payments to reward employees for high performance or goals achieved. Court actions also often include required recompense payments for losses from expenses incurred over a specified action or series of tasks.

Recompense payments are one of the main tenets of capitalism. They provide relevant incentive for actions and tasks performed through assurance of due payment. In a capitalist society, these payments can be relied upon because of the standards set by legal frameworks for citizens and businesses.

Recompense Payment Examples

As an example, companies may pay its workers with a special cash bonus as a result of the workers' efforts in contributing to the company's profits. These special cash bonus payments are often contingent upon past performance levels achieved or corporate goals attained during a previously specified period of time.

Recompense payments are also often referred to in worker compensation cases. In worker compensation cases, companies may be required to pay recompense payments as compensation for past injury or harm incurred by an employee as a result of work on the job or the company's negligence.

Companies under business organization often have reserve funds allotted for various types of recompense payments. These funds are typically paid into on a regular basis to allow for appropriate and timely payout of recompense payments or rewards. Payments of recompense are denoted as a liability on corporate balance sheets.

In the case of a legal matter, an individual or entity may be required to make recompense payments as compensation for past damages or losses incurred through the course of a series of events or tasks under judgment in a legal proceeding. Expenses eligible for recompense may occur throughout the duration of a case in legal court. In legal court cases, expenses for recompense are required to be paid in full to the damaged party upon a legal order by the court. Terms of legal recompense payments are typically outlined and awarded based on the court’s legal view of just and adequate compensation for loss or damages.

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.