Yes she can upgrade to a new phone which you can use on PAYG as long as you are on o2 also.
If not she will need to get the phone unlocked first.
I have no affiliation whatsoever with O2 or any subsidiary companies. Comments posted are entirely of my own opinion.
This is not Customer Service so we are unable to help with account specific issues.Currently using:
Pixel 7a (O2 & Lyca), One Plus 6 (Sfr), iPhone 12 Pro Max (Vodafone)