The adoption of Artificial Intelligence (AI) technologies is increasingly transforming the operations of small and medium-sized enterprises (SMEs), influencing employee productivity (EP) through automation, decision support, and adaptive learning systems. This paper investigates the multifaceted effects of AI adoption on employee productivity in SMEs, drawing insights from recent empirical and theoretical studies. The analysis explores both enablers and inhibitors of productivity, emphasizing the mediating roles of organizational culture, employee autonomy, and technostress management. Studies in the literature suggest that AI integration can significantly enhance EP when combined with ethical governance and supportive work environments. Conversely, unregulated AI deployment may induce objectification, job anxiety, and reduced engagement. To address these challenges, this paper proposes a conceptual framework linking AI-enabled process innovation, task redesign, and upskilling to sustained productivity gains. The findings highlight that SMEs should strategically align AI adoption with human-centric practices to ensure that productivity improvements are both measurable and sustainable.