If she doesn't agree to take a second (or any) salary reduction they cannot go ahead and reduce her salary, if its done its then considered an unlawful deduction in salary. But only she knows where the mindset of her Employer is at in regard to how hard they may be willing to play hardball and if her decision may lead to dismissal or redundancy or just make day to day life for her very difficult. This annual re-issue of her contract does not really have standing in law, she was hired 10 years ago and is protected by statutory law regardless of what may be written on any contract, she is not re-hired annually I presume (unless there is a break in Employment annually or she is hired as a Contractor?) so it appears to be in some way an annual review put down on paper and for some reason trumped up as a contract. Also you stated that there was a salary reduction just prior to year end, therefore not part of the 'contract' she received this time last year. It sounds like a place where Management or HR may have a vague knowledge of employment law but a great knowledge of what they want from their staff and there is a strange marraige of convenience as a result. All I can advise is she weigh up what she wants and guage any possible reaction by her Employer against the decision she may make if a second salary reduction is proposed. Its not a great time to be unemployed either via redundancy or dismissal and its never a great time to be dealing with hassle or unpleasant feelings in the workplace.