Compensation vs Restitution
Understanding the distinction between the terms Compensation and Restitution can be challenging at first. However, once you consider the meanings of each term, the difference becomes apparent. We often hear the term Compensation, such as when someone receives payment for their work or service, or when someone is paid for a particular loss or injury. The term Restitution is more obscure, and for those not involved in the legal field, it may be unfamiliar. It’s important to note that from a business perspective, Restitution has the same meaning as it does in law, while Compensation is not solely limited to its legal definition. Let’s explore further.
What does Compensation mean?
The fundamental definition of Compensation is something of value or importance given in exchange for something else. A common example is the salary paid to an employee for their work, or a monetary sum paid to a person for the service they provide. Compensation can be both monetary and non-monetary. For example, an employee may receive not only remuneration but other benefits such as a yearly bonus, profit sharing, overtime pay, rewards for outstanding achievement/service, a company vehicle, housing, and others. Another interpretation of Compensation is the act of making up for a loss or injury suffered. Therefore, Compensation is an award, usually monetary in nature, given to make amends for a specific loss, damage, injury, or lack of something else. From a business perspective, this may involve the company paying Compensation to employees who suffered a loss due to the company’s actions, such as job loss or other losses or pain. The term also refers to a payment made to a wronged party in a legal action for a particular injury, loss, or pain suffered as a result of a wrongful act. Keep in mind that the objective of Compensation, in this sense, is to compensate a person for the loss suffered.
What does Restitution mean?
Generally, Restitution refers to the act of restoring something to its former or original state and/or returning something to its lawful owner. Restitution means returning a person to the position they were in before the wrongful act or breach occurred and also, returning something that was lost or stolen, such as a person’s property or rights, to its rightful owner. Restitution also refers to a type of equitable remedy available in law. The remedy of Restitution operates based on the gains or profits obtained by the defendant unjustly. This unjust gain is typically the result of the defendant committing some wrongful act or breach of duty or contract. Unlike Compensation, it does not focus on the plaintiff’s losses. The court will order the defendant to pay the plaintiff an amount equivalent to the gains or profits unlawfully earned by the defendant. The defendant must give up his/her gains. The purpose of granting Restitution is to restore the innocent party to their rightful position before the wrong occurred and to prevent the unjust enrichment of the defendant. Restitution is commonly granted in cases involving breach of fiduciary duty, torts, breach of contract, and some criminal offenses.
What is the difference between Compensation and Restitution?
- Compensation refers to the act of compensating a person for the work or service performed.
- Restitution refers to the act of restoring a person to his/her former position and/or returning something to its rightful owner.
- Restitution is a remedy in law wherein a court orders a defendant to surrender his/her gains or profits to the plaintiff.
- In contrast, Compensation is given as payment for a loss or injury suffered by the plaintiff as a result of the defendant’s actions. Thus, Compensation focuses on the amount the innocent party lost, while Restitution focuses on the amount the defendant gained as a result of the wrongful act.
- In certain cases, the innocent party may choose to seek the remedy of Restitution instead of Compensation if the loss (financial amount) suffered by the victim is less than the amount the defendant gained unjustly.
