That setting includes SIM contacts and contacts syncing with other cloud services, but you can only manage them on the original device.

Tip: To use device contacts across Google services without saving them as Google contacts, turn on Save contact info from your devices. SIM contacts and contacts syncing with other cloud services (like Exchange, Yahoo, or others) cannot be automatically saved as Google contacts. What about SIM contacts and contacts that sync with other cloud services? Tip: Depending on your device make and model you may not be able to automatically back up and sync device contacts. Your Google contacts will remain in your Google Account and sync to a new device when you sign in. When you sign out of a phone or tablet, all your Google contacts will be removed from that device to prevent other people who use that device from accessing them. Your existing device contacts and any future device contacts you add will be automatically saved as Google contacts and sync to your Google Account. Tip: You can’t back up contacts to a child’s account or a G Suite account (one you use for work or school). Your contacts can only be automatically saved to one Google Account. Pick the account you’d like your contacts to be saved in. Turn on Automatically back up & sync device contacts. Tap Google Settings for Google apps Google Contacts sync Also sync device contacts Automatically back up & sync device contacts. On your Android phone or tablet, open the 'Settings' app. Back up & sync device contacts by saving them as Google contacts:

Google backup and sync app