When having the Entitlement Includes Public Holiday? option ticked in a user's planner, but there is no public holiday template assigned, you need to refresh their planner.
To do this, go to the employee's planner settings and deselect and select again the Entitlement Includes Public Holiday? option.
📌Note: If you include public holidays in their entitlement, add the number of public holidays in the year to the employee's entitlement. Then any public holidays that land on a working day for that employee are automatically booked from their entitlement.
If you don't include public holidays in their entitlement, the employee is still on a public holiday template. This will simply display as a non-working day for an employee and will not affect the entitlement.