Assertion (A) : Compensation has two vital domains economic concept and psychological concept.

Reasoning (R) : Compensation basically represents an employment contract

The Workmen's Compensation Act, 1923 also known as The Employees Compensation Act, 1923 is among the earliest social security legislation in India with the purpose of making employers liable to compensate an employee who is affected, or to their dependent in case of death.

Compensation:

• Compensation is a systematic approach of providing monetary value or benefits in exchange for their work performed.
• A compensation basically represents an employment contract that is signed by the employer and employee agreeing to the terms of the employment relationship.
• The organizations compensate their employees according to their qualifications, experience, skills, knowledge, performance, and job responsibilities.
• Compensation has two vital domains, economic concepts like payment to salary and other allowances and psychological concepts like covering up of weaknesses, frustration, desires, or feelings consciously or unconsciously in one life area through excellence in another area. 
• In other words, psychological compensation works as a defense mechanism in which people overachieve in a specific area to compensate for their failure in another area.

Therefore, from the above explanation it is clear that (A) and (R) is correct but (R) is not the right explanation of (A).