hi puja,
to know the actual answer, it will take full time work over several months...
let me share a brief snapshot:
1. Standard position description (refered to as JD in normal language): one of the finest resources is "O net"
2. job evaluation: read minimum two different systems, good examples are Hay point factor, job grading...
for job grading, check any of the govt depts for definitions/ salary levels etc...
for hay point factor, am afraid i cannot share copyright info...
its an exhaustive version of how we compare jobs in real life eg education/ experience levels/ information complexity/ span of control/ budgets and so on...(to give a brief indication there are 24 compensable factors & 4-10 levels on each factor)
3. salary survey: this helps us in taking care of "external equity".. ie in layman terms what others are paying for
4. Wage arbitrage on a global level: hiring stats/ industry studies reveal patterns in global equity eg nurses are reqd in a particular country abroad, the home country will feel the shortage and salaries will rise.. on the contrary, in the place of posting with coming of expat staff locals will face competition...
5. technology: ITES is a good example and spans across almost every known function...
6. Income tax regulations
7. social complainces eg pf/e si/ bonus etc
8. individual motives: there are 9 career anchors. we know the priorities by a scientific test "RSI"
9. business needs of the company: every company is unique (refer to swot analysis)
and so on....
we have a cutting edge methodology which takes care of all the variables mentioned above..
its known as "cafetaria or flexible benefits" plan
am a certified compensation and benefits manager (CAMI) with exposure in EMEA/ APAC regions..
feel free to raise specific queries..