Parents with children in neonatal care will gain a day-one right to paid leave and pay in a move hailed as “a lifeline for parents” with sick babies.

From Sunday, the measures will allow eligible parents to take up to 12 weeks of leave and pay, on top of maternity and paternity leave.

Neonatal care leave will be available to parents of babies who are admitted into neonatal care up to 28 days old and who have a continuous stay in care of seven days or longer. One in seven UK newborns needs to be cared for in a specialist hospital unit.

The Labour government’s employment rights bill, which passed its third reading in the House of Commons last month, will also provide other employment reforms such as menopause support, day-one rights for paternity, parental and bereavement leave for eligible workers, as well as protections against unfair dismissal for pregnant women and new mothers.

Under the changes in the proposed legislation, parents in Britain will be granted a right to bereavement leave after experiencing a miscarriage. Mothers and their partners will be given the right to two weeks of bereavement leave if they have suffered a pregnancy loss before 24 weeks’ gestation.

The reforms will also allow 1.3 million of the lowest-paid UK workers to be guaranteed sick pay worth up to 80% of their weekly salary from the first day of sickness.

The employment rights minister, Justin Madders, praised campaigners and parents with experience of caring for very poorly children, calling them “an inspiration to us all” for showing the necessity of the new leave and pay entitlement.

He said: “We know that many employers already go above and beyond the statutory minimum, which is why as part of our plan for change we are creating a level playing field that ensures parents, wherever they work, have the vital relief they need to switch off from work and focus on their newborn baby.”

Bliss, a charity that supports the families of premature and sick babies, has called the change in the law transformative and said it would provide thousands of employed parents every year with the assurance that they can take the time to be with their sick baby when they need it most.

Catriona Ogilvy, the founder of the parent-led charity the Smallest Things, said she was thrilled that leave and pay would finally be available to families from Sunday.

Ogilvy said: “This new law is the result of a decade of tireless campaigning by those who truly understand – neonatal parents themselves. They know the journey doesn’t end when babies come home from hospital.

“Neonatal leave will give families back stolen time. Time to be with their baby without the worry of work or pay. Time to bond. And time to begin to recover – both physically and mentally.”

The minister for women’s health, Gillian Merron, said the law would give parents peace of mind so they could focus on their family.

She said: “No parent should have to choose between being with their vulnerable newborn or returning to work. Our action today will make all the difference to families going through an incredibly stressful time.”