The First Minister will announce the measure when she reveals her 2017/18 programme for government on Tuesday, according to reports.
The SNP had committed to lifting the pay cap for public sector workers earlier this year, describing it as “increasingly unsustainable”.
She is expected to announce “significant” measures to protect the environment and improve the quality of housing when she sets out her 2017/18 programme for government on Tuesday, the Press Association reported.
Opposition parties called on the Scottish Government to go further to tackle climate change and austerity, and criticised the SNP for failing to move quickly enough on legislation proposed last year.
The Scottish Government said MSPs at Holyrood could expect to hear details of Sturgeon’s “most ambitious” programme yet, with 16 bills to be added to the 11 currently in progress.
Sturgeon said: “This programme for government is our plan to shape the kind of Scotland we all seek – an inclusive, fair, prosperous, innovative country, ready and willing to embrace the future.
“It includes major reforms in education, health and justice, new opportunities for our communities and important measures to safeguard the environment and improve the quality of housing.
“Crucially, this programme for government also sets out a bold and forward-looking economic vision – sending a clear message to our people, businesses, schools, colleges and universities, and to the wider world: Scotland’s ambition is to be the inventor and the producer, not just a consumer, of the innovations that will shape the lives of our children and grandchildren.”
On Brexit, Sturgeon said her government would continue to make the case for staying in the single market and customs union and for the protection of human, environmental, employment and consumer rights.
The First Minister also pledged to resist any “power grab” by the UK Government over the repatriation of powers from the EU and make the case for extending the powers of the Scottish Parliament in areas such as immigration, social security, employment rights and trade.
The Scottish Conservatives said the SNP were “still playing catch-up” on last year’s programme, with less than a quarter of the bills proposed in 2016 passed.
The party has called for legislation on local government funding, business rates and planning, as well as bills on education, the introduction of whole-life sentencing and Frank’s Law, which would allow under-65s with conditions like dementia to receive free personal care.
Leader Ruth Davidson said: “Scotland cannot afford a repeat of last year’s programme for government, when the SNP set out a range of ideas, but delivered on hardly any.
“Even without the upcoming programme, ministers would still be playing catch-up on last year.
“We need to build more homes, recruit more teachers and get our economy back in the fast lane.”
Urged to ‘end austerity’
Labour urged the Government to use the powers of the Scottish Parliament to “end austerity” and introduce policies such as increasing child benefit, scrapping the council tax and increasing income tax to invest in public services.
Alex Rowley, the party’s interim leader following Kezia Dugdale’s shock resignation on Tuesday, said: “Holyrood has the powers, now it needs a government with the political will and the ambition to end austerity and tackle poverty head-on.
“We have over a quarter of a million children living in poverty in Scotland. The time for tinkering round the edges is over.”
The Greens have proposed an alternative programme which includes using income and local tax powers to tackle inequality, a ban on fracking and a rethink on proposed cuts to aviation tax.
Co-convener Patrick Harvie said: “The SNP government is looking for a reset.
“Greens are putting forward a host of ideas that could revitalise Holyrood and create a fairer, greener Scotland.
“Ministers must be prepared to go further and traditional SNP timidity must give way to a bolder, braver agenda.”