A social services group on Thursday praised the financial secretary's budget initiative to encourage bosses to hire elderly workers, but said barriers still remained to bringing older people back into the SAR's shrinking workforce.

In his budget on Wednesday, Paul Chan proposed an increase in the tax deduction for voluntary contributions made by employers to the Mandatory Provident Fund schemes of workers aged 65 or above, from 100 to 200 percent. He said this would encourage employers to hire older workers, while also building up the retirement savings of the staff themselves.

The Hong Kong Council of Social Service said the measure would encourage employers to hire elderly people. But the group's business director, Anthony Wong, says it's not enough.

"[Employers] find it difficult to purchase employment insurance or different kinds of supportive measures [for elderly workers]. Even on providing medical benefits, that would require an extra expenditure," he told RTHK.

Wong said the government should consider rolling out further measures to maximise the effect of the tax incentive in encouraging people to hire elders.

"In view of the current situation of a shrinking labour force, I think we may engage the community to discuss whether we should extend the retirement age."

Chan said in his budget speech that Hong Kong now has 1.5 million residents aged 65 or above, adding that many are still able and willing to work.

However, the founding chairwoman of the Association of Retired Elderly, Teresa Chu, questioned whether the increased tax deduction would give employers enough of an incentive to hire older people.

She noted that elderly people faced many challenges in looking for jobs.

"Many elderly people might wish to continue to work beyond retirement age. However, their willingness is sometimes irrelevant. Not all elderly people have good health and stamina to continue working," Chu said.

"The world is fast changing and the labour market expects employees to possess certain new skills, especially technology skills, which most elderly people do not possess, making it difficult to find a job that they are willing to take."