How do you decide what the pad size should be?

Looking at stuff I've done:

Pluggable terminals: Approx. 3.2mm pad.
4007 etc., approx. 2mm pad.
Half watt resistor around 1.6mm.

It's a balance between having enough copper for easy soldering and not making them unreasonably large.

Note that those are for PTH boards; if I were designing a single-sides board I would use somewhat larger pads where practical, as there is much less metal for solder to flow and make a good joint (and without the pad being too fragile & lifting during assembly).

For a through hole pad:

Hole size + (2 x min annular ring)
The min annular ring size is specified by the PCB manufacturer.

so...if,
Hole size = 32 mils
Min annular ring = 12 mils (JLCPCB)
then,

32mils + (2 x 12mils=24mils) = 56 mils (min PAD size)

The PAD size can be larger if you want, but it cant be smaller than min PAD size.