The Reagan administration last week opposed legislation requiring employers to continue health benefits and protect the jobs of employes for up to 18 weeks of unpaid leave to care for newborn, newly adopted or seriously ill children.

A benefit requirement "directly contravenes our nation's consensus that fringe benefits should be the subject of voluntary negotiation between employers and employes," said Assistant Attorney General Stephen J. Markman, speaking for the administration at a Senate hearing. "The voluntary approach maximizes the welfare of employes because it leaves them free to choose for themselves which benefits they most desire."

He also argued that the legislation would be most felt by smaller businesses and could lead to discrimination against young women more likely to want such leave at some point in their careers.

Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate subcommittee on children and families and chief sponsor of the legislation, has held hearings on the bill throughout the country and said Thursday that the hearings showed, "without a doubt, the need for a minimum federal standard to protect both families and businesses."

The legislation would exempt companies with fewer than 15 employes, about 80 percent of the firms in the country, according to Dodd. But it still would cover 71 percent of the nation's workers, most of whom work for larger companies.

Key House members recently negotiated a compromise approach that would require up to 10 weeks of unpaid leave for birth, adoption or serious illness of a child, and up to 15 weeks over a two-year period for a worker's own serious illness. The compromise bill exempts companies with less than 50 employes and does not apply to the company's highest-paid employes.

That legislation is expected to be considered soon in the House Education and Labor Committee.

The cost of the proposals to employers has been a source of debate. The U.S. Chamber of Commerce originally estimated it would cost businesses $16.2 billion a year but later called this a worst-case scenario and reduced its estimate to $2.6 billion.

The General Accounting Office this week released a much lower estimate of $500 million to the Senate subcommittee. GAO said the chamber's estimate assumed that employers would replace all employes on leave, when actually only one-third are replaced.

"We don't think it would cause a major disruption for employers," said William J. Gainer, GAO associate director of human resources.

The National Federation of Independent Business, representing smaller companies, said that most companies already have leave policies covering births and illnesses but that companies need the flexibility to respond to changing demands.

"Business owners fear that such a precedent {as mandatory unpaid leave}, once set, would open the floodgates to an increasing number of attempts to force businesses to pay for every benefit deemed desirable by various elements in the national work force," said federation governmental relations director John Motley III in written testimony.