This article explores different notions of social justice implied in the concept of compensation in social welfare. Compensation is a primary allocative principle according to which programs are structured and eligibility for benefits is determined. While familiar in legal terms, the notion of compensation within the social welfare domain has a very different meaning. This article clarifies the meaning of compensation in the social welfare context and distinguishes it from two other principles: need and insurance. The implications of employing these principles in social welfare programs is illustrated by an ex-amination of disability policy in Israel.