Phyllis comes to work dressed as Santa and wishing everybody a Merry Christmas. Erin finds the costume edgy and the others are happy that Phyllis finally gets to fulfill a dream of playing Santa.
As everybody prepares for the holiday party, Michael barges into the office wearing his own Santa suit. Michael is livid with Jim that he's allowed Phyllis to play Santa. He demands that Jim tell Phyllis she cannot be the office Santa, but Jim refuses. Michael sets out to be the real office Santa Claus, calling Phyllis "Tranny Claus."
Andy is continuing to woo Erin, by re-creating the 12 Days of Christmas for her. She is clueless to the fact that Andy is her "Secret Santa," and Andy now wants to keep it that way, especially when Erin makes it known that the presents are way too overboard. Phyllis agrees to keep the secret safe, until Michael reveals out of spite that Andy is, in fact, Erin's Secret Santa.
After the office decides to hold a vote, Phyllis clearly wins the job of playing Santa. A disgruntled Michael hides out in his office as Phyllis takes over Santa Claus duties, like lighting the tree and telling holiday stories. Michael is determined to take back the holiday party by playing the role of Jesus.
Michael has had enough with Phyllis's portrayal of Santa and immediately calls up David Wallace. David tells Michael he has bad timing and lets Michael know he's been fired. Michael is shocked, especially when David says that when Dunder Mifflin is officially sold, everybody will be out of a job.
Michael gathers everybody in the conference room to tell them the bleak news about Dunder Mifflin's future. Jim's shocked with the way Michael shouts out that they are going out of business. Jim assures his staff that just because Dunder Mifflin has been sold does not mean they are all out of jobs.
Michael gets ahold of David and puts him on speakerphone in front of the entire Scranton branch. David tells everybody that he never told them they would be fired, he said the executives, including himself, are out of a job. Everybody in the office cheers about the good news of keeping their jobs.
After the office receives the news about their jobs, they all go back to celebrating at the holiday party with singing, socializing and opening up presents. Michael takes it upon himself to sit on Phyllis's lap and make his own Christmas wish, she tells him whatever he wants he can have because now he's being a good boy.
As everybody is heading to the parking lot, they are surprised at the sight of 12 drummers, a continuation of Andy's 12 Days of Christmas present to Erin. He tells a beaming Erin, "Merry Christmas," and continues to dance to the beat of the drums.