Tell the person who isn't working "You're not working to the required standard, you have this week and to the end of next week to show the required improvement or you will be let go".
That's exactly what you should say, and don't act all "I'm sorry" etc.etc. because nice guys finish at the bottom, and as a person I wouldn't feel happy knowing that my MD had no business sense, I'd rather he'd be a complete **$**** and give me job security and promotion prospects than touchy feely and a complete dipstick.
And just because it's Christmas makes no difference, if they wanted money they'd pull their finger out - Remember you're not a charity.
Of course, you have to treat your real assets (because that's what staff are) with understanding and award their excellent productivity and dedication, because after all, your extra 'push'/money wouldnt exist if it wasn't for them.